Ian Dorrington, Argonaut
BUY RECOMMENDATIONS Botanix Pharmaceuticals (BOT)
Chart: Share price over the year
BOT held a successful pre-investigational new drug meeting with the US Food and Drug Administration for its lead acne treatment product, BTX 1503. Significant news flow is expected in the next six months, including data from acne and atopic dermatitis trials, potential Permetrex licensing deals and continuing development of pipeline products. West African Resources (WAF)
Chart: Share price over the year
This gold exploration company continues to drill the M1 deposit at depth, with recent holes targeting extensions of the high grade lodes at more than 500 metres below the surface. In our view, this has the potential to triple the existing resource at M1 (298,000 ounces). Drilling is also continuing at M5, which shows mineralised zones are persistent to more than 400 metres below surface. We view the recent drilling results as having significant potential to upgrade the existing resource inventory. HOLD RECOMMENDATIONS Doray Minerals (DRM)
Chart: Share price over the year
The latest round of results show the Da Vinci Lode has extended further towards the surface with up dip holes returning ore grade intercepts. Overall, its positive news for this gold exploration company. The rapid drill out and exploitation of this area will be the real key to value, in our view. But we think the development of Da Vinci will be longer dated. Saracen Mineral Holdings (SAR)
Chart: Share price over the year
This gold miner released September quarter results with group production of 80,274 ounces. This was in line with the June quarter, but with an 11 per cent decrease in all-in sustaining costs to $A1008 an ounce. Annualised production is tracking at 321,000 ounces, well above guidance of 300,000 ounces for fiscal year 2018. SELL RECOMMENDATIONS Western Areas (WSA)
Chart: Share price over the year
September quarter results showed 5300 tonnes of nickel in concentrate production at C1 cash costs of $A2.49 a pound, down 7 per cent and up 3 per cent respectively. The Mill Recovery Enhancement Project is well advanced and expected to start commissioning in the 2018 first quarter. We have downgraded WSA from a buy to a sell based on valuation grounds. Independence Group NL (IGO)
Chart: Share price over the year
We revised our price target from $3.30 to $3.80 after incorporating additional mine life at the Jaguar operation. This was based on the recent reserve update and a higher allocation to exploration assets – from $100 million to $200 million. We downgrade this diversified mining company from a hold to a sell because the stock was recently trading more than 15 per cent above our target price. The shares were trading at $4.345 on November 2.
Michael Heffernan, PhillipCapital
BUY RECOMMENDATIONS
Macquarie Group (MQG)
Chart: Share price over the year
A second tier Australian bank that’s more diversified than the four majors. It’s been a strong sharemarket performer in the past 12 months and its recent profit result beat expectations. Also, its links to improvements in overall sharemarket activity should be of material assistance to its future revenue and profit. Cimic Group (CIM)
Chart: Share price over the year
A leading construction stock that stands to benefit from prospective growth in infrastructure spending by most levels of government. Its recent contract winning streak shows no signs of abating, and it pays a reasonable 2.5 per cent fully franked dividend yield. HOLD RECOMMENDATIONS
G8 Education (GEM)
Chart: Share price over the year
A childcare centre operator providing educational services across Australia. This company has sound fundamentals and I expect its services to remain in demand going forward. Tabcorp (TAH)
Chart: Share price over the year
This one’s for the punters. The Australian Competition Tribunal is reviewing the proposed $11 billion merger/takeover of Tatts Group. I believe the merger is still likely to proceed in a modified form and generate valuable synergies over time. But, equally, investors should factor in the possibility the merger won’t happen. SELL RECOMMENDATIONS
Perpetual (PPT)
Chart: Share price over the year
The share price of this leading financial services company was $56.20 on August 29. The shares closed at $49.30 on November 2. In my view, it has disappointed when it should have excelled given the flood of funds flowing into superannuation. Until profit growth momentum improves, I prefer other financial services companies. JB Hi-Fi (JBH)
Chart: Share price over the year
The discretionary retail sector is generally out of favour with the market. The impending arrival of Amazon is already hurting the operating environment. While JBH has been an outstanding sharemarket performer over the years, it may be time to consider taking a profit.
Gavin Wendt, MineLife
BUY RECOMMENDATIONS
Red River Resources (RVR)
Chart: Share price over the year
A leading pure play zinc producer, recently commissioning its Thalanga zinc operation in Queensland. It’s focusing on ramping up output, while looking to boost plant throughput and extend mine life through brownfields exploration success. It has various resources and reserves within deposits that form part of the current mine plan. It’s aggressively appraising these through drilling, while exploring other targets within the surrounding area.
Lake Resources N.L (LKE)
Chart: Share price over the year
LKE maintains one of the largest lithium tenement packages in Argentina, with about 170,000 hectares near some of the largest players in the lithium sector. Three key lithium brine projects are within the lithium triangle, which produces half of the world’s lithium. Interest is building as maiden drilling is set to start on its Kachi lithium brine project in coming weeks.
HOLD RECOMMENDATIONS
Kairos Minerals (KAI)
Chart: Share price over the year
KAI offers exposure to the burgeoning Pilbara conglomerate gold rush, maintaining 1158 square kilometres of prospective tenure. A recent field assessment, along with results from a review of available geological information, has highlighted the presence of at least 100 strike kilometres of prospective lower Fortescue Group rocks. Major exploration programs are underway, targeting these prospective stratigraphic horizons that have been associated with several recent high profile gold discoveries.
Metro Mining (MMI)
Chart: Share price over the year
MMI’s flagship Bauxite Hills mine in Queensland will allow it to benefit from the rapidly expanding seaborne bauxite market into China by ramping up to 6 million tonnes a year of DSO (direct shipping ore) product within four years. It currently has a 17 year mine life and operations are scheduled to start during April 2018. At current prices, the project would achieve greater than $25 a tonne margins, facilitating rapid payback of development capital expenditure (pre-production capital expenditure of about $36 million).
SELL RECOMMENDATIONS
Mustang Resources (MUS)
Chart: Share price over the year
MUS had announced taking 405,000 carats to its maiden rough ruby tender, which is more than double the 200,000 carats it initially targeted. This is an outstanding result, driven by the highly successful ramp-up of operations at its Montepuez Project in Mozambique. In the past 12 months, the share price rose from a low of 2 cents to a recent high of 20 cents. The shares closed at 4.6 cents on November 2.
Sheffield Resources (SFX)
Chart: Share price over the year
The share price of this mineral sands company has risen from a 12 month low of 41 cents in September to a recent high of 85 cents. The key has been major advancements significantly de-risking the project, three binding off-take agreements with zircon end users, EPA project approval, Native Title approvals and arrangements for a $200 million debt funding facility. Some investors may want to consider taking profits given the share price rise. The shares closed at 68.5 cents on November 2.
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