Mining And Energy Players With Quarterly Updates – SLR, AJM, COE, CVN

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Mining And Energy Players With Quarterly Updates – SLR, AJM, COE, CVN

 Mining And Energy Players With Quarterly Updates – SLR, AJM, COE, CVN

The resource-rich nation has recently entered the reporting season, with ASX-listed companies releasing their results for the quarter/year ended 30 June 2019. Gold producer, lithium miner and oil & gas producer among other mining and energy sector companies have gained investors’ attention for lot many change taking place in macro-economic environment like Fed’s rate cut of 25 basis points first time since 2008, electric vehicle market brewing at tremendous rate, and Trump’s and OPEC’s new oil production strategies. Given this backdrop, let’s see what the four mining and energy companies- SLR, AJM, COE, CVN- have come up with in their quarterly results.

Silver Lake Resources Limited (ASX: SLR)

Silver Lake Resources Limited reported 85% increase in 2Q FY19 production to 64,557 ounces of gold equivalent compared to the quarterly production of 3Q FY19. This reflects the inclusion of Deflector production from 5 April 2019, which included record quarterly gold production of 27,514 ounces and copper production of 575 tonnes for the June quarter, up 30% on March 2019 quarter.

FY19 Silver Lake group production and AISC by quarter (Source: Company Announcement)

Following the completion of the Doray Minerals’ acquisition and contribution from Deflector, SLR’s sales increased significantly to 60,841 ounces gold and 590 tonnes copper, 63,319 ounces gold equivalent, at an average of A$1,790/oz and AISC of A$1,216/oz for the quarter. The annual sales of the company stood at 171,322 ounces gold equivalent in FY19 at an AISC of A$1,367/ounce, up from the sales of 148,533 ounces at AISC of A$1,289/ounce in FY18.

Acquisition of EganStreet Resources Limited

On 30 July 2019, Silver Lake announced its intention to acquire 100% interest in ASX-listed EganStreet Resources Limited (ASX: EGA) at an exchange ratio of 0.270 Silver Lake shares for every EganStreet share held. This offer consideration values EganStreet at $0.400 per share, which reflects a premium of 28.9% to its last close price of $0.310 and implies a $52 million total transaction enterprise value.

Both the parties to the transaction have entered into a Bid Implementation Deed (BID) and, in addition, EganStreet’s biggest shareholder, Lion Selection, has inked a Pre-Bid acceptance deed SLR under which it has agreed to accept the offer in respect of its 16.2% holding.

EganStreet’s key asset is the 100% owned Rothsay Gold Project, which is an underground, high-grade gold project located ~85km south-east of Silver Lake’s Deflector mine. The acquisition of EganStreet would reportedly allow Silver Lake to consolidate an additional JORC Resource of 454,000 ounces and JORC Reserve of 200,00 at the Rothsay Gold Project.

Its important to note that the acquisition of EganStreet is in line with strategy of creating new opportunities through the combination of Silver Lake’s established processing infrastructure at Deflector, free cash flow generation and strong balance sheet.

RBC Capital Markets and Sternship Advisers are acting as a financial adviser of Silver Lake for this acquisition, with the legal adviser HopgoodGanim Lawyers. EganStreet’s financial adviser is Taylor Collison and its legal adviser is GTP Legal.

FY 2020 Outlook

Silver Lake posted sales guidance range of 215,000 to 230,000 ounces gold equivalent for FY20 at an estimated average AISC range of A$1,375/oz to A$1,450/oz. The company also eyes an exploration spend of A$18 million to support operations and leverage the Mineral Resource upside within Silver Lake’s mineralised corridors.

On 2 August 2019, SLR stock price surged up by 4.508% on the news of United States imposing more tariffs on China, thereby giving support to Gold price on the foreseeable economic crisis across the globe. SLR closed at $1.275 with a market capitalisation of $998.41 million.

The bullish trend came a day after the stock declined 6.87% on the news of fed rate cuts.

Also Read: Silver Lake Announced Results For 1HFY19 With Revenue Up By 4.0%

Altura Mining Limited (ASX: AJM)

On 1 August 2019, Altura Mining Limited announced that the company has inked a Binding Offtake Agreement (BOA) with established Chinese Lithium materials producer Guangdong Weihua Corporation.

The agreement has been executed for a term of 5 years under which 50,000 tpa of 6% grade spodumene concentrate (SC6) would be shipped to Weihua from Altura’s flagship lithium mine located at Pilgangoora in Western Australia. As per the company’s information, the first shipment under the agreement is scheduled to load in August, including ~10,000 dmt, with further deliveries for 40,000 dmt expected to take place until February 2020.

Let’s have a look at the key highlights of the company’s quarterly results for three months ended 30 June 2019.

  • Altura’s production of spodumene concentration increased from 29,627 wmt in March 2019 quarter to 42,402 wmt in June quarter, reflecting an increase of 43% on the previous quarter. The increase in production outlines the continued improvement in plant recovery, delivering an average 65% throughout the quarter, with periods during the month of June reaching as high as 70%.
  • The company’s first full quarter of commercial production delivered an average operating cash cost of US$392 wmt produced (FOB basis). Altura stated that this operating cost confirms that it is on track to deliver globally competitive operating costs in the near term with several improvement initiatives to be implemented over the coming months.
  • More importantly, Altura’s Q4 FY19 sales increased 160% to 38,635 dmt spodumene concentrate compared to March quarter. It included the delivery of high-quality lithium concentrate, shipped via 5 cargoes and in line with offtake specifications.

Altura’s Mining and process quantities in FY2019 (Source: Company Announcement)

  • Average realised price for June quarter was US$600 dmt (CIF to mainland China basis SC6) which remains in line with US$601 dmt realised in March quarter 2019.

As at 30 June 2019, Altura’s cash balance stood at $9.51 million including the receipts from customers of $27.98 million during the quarter.

Altura’s stock edged up by 1.02% to last trade at $0.099 on 2 August 2019. Over the past 12 months, the stock has declined by 66.67% including a negative price change of 10.91% in the past three months.

Cooper Energy Limited (ASX: COE)

Cooper Energy’s sales revenue for the three months to 30 June 2019 was $18.7 million, 9% lower than the prior quarter’s $20.6 million due to lower oil sales volume.

However, the volume of gas sales during June quarter was reportedly in line with the previous quarter. This led the company’s full year sales for FY2019 increased to $75.5 million, up 12% than the comparative of $67.5 million.

On the production front, Cooper Energy’s total production slipped to 0.32 million boe in June 2019 quarter, slightly below the 0.33 million boe of the March 2019 quarter. The company stated that lower crude oil production led to a marginal reduction in total production from the prior quarter.

Its full year production totalled 1.31 million boe, in line with revised guidance issued with the March quarterly report, and 12% lower than the FY18 production of 1.49 million boe.

Key Metrics of COE performance (Source: Company Announcement)

FY2020 Outlook

Cooper Energy eyes Fiscal 2020 to be a milestone year in its life as the Sole gas field comes on-line. On the addition of Sole, the company expects its daily gas production to increase by more than 5x from an annual average of ~15 terajoules per day.

Based on existing production assets in Otway and Cooper Basins, COE posted its production guidance of ~1.2 million boe in FY20. It expects oil production of approximately 240,000 barrels from Cooper Basin. However, this guidance does not include the contribution from Sole; Cooper expects that Sole is expected to add 68 TJ (11,000 boe) per day at plant design rates.

COE stock traded flat on 2 August 2019. The stock last closed at $0.580. Over the past one year, the stock has surged up by 24.73% including a positive price change of 7.41% in the past three months.

Carnarvon Petroleum Limited (ASX: CVN)

During the June 2019 quarter, Carnarvon completed the Dorado-2 appraisal well, thereby confirming the company’s expectations of a major gas and oil resources at Dorado. The quarterly report further read that the Roc South-1 well commenced drilling following the completion of the Dorado-2 well. Roc South is located approximately 13km from the crest of the Dorado structure.

The company also informed that the high-quality oil was extracted from the Caley reservoir, which returned excellent reservoir properties of the levels comparable to those discovered in the Dorado-1 well. In the Baxter reservoir, a secondary target, Carnarvon successfully extracted condensate rich gas and the wireline logging reportedly confirmed that a hydrocarbon column was encountered with no gas-water contact identified.

Carnarvon told that the Government of Timor-Leste has also officially agreed to endorse the environmental plan accepted by the Australian regulator upon ratification of the Maritime Boundary change. This achievement reflects an important milestone in the Buffalo project.

A 3D Seismic survey also began over Dorado, Roc and nearby prospects. The Keraudren 3D has reportedly been designed to improve the data quality over the Dorado and Roc discoveries and a number of nearby prospects. Carnarvon stated that the survey will assist with development and drilling exploration targets in the future.

During the quarter, Carnarvon incurred exploration expenditure of A$18.9 million primarily relating to the drilling costs for the Dorado-2 and Roc South-1 wells and preparatory work on the Buffalo oil field redevelopment project. At the end of the quarter, Carnarvon held a strong cash balance of A$73.8 million.

CVN’s stock traded flat on 2 August 2019. Whereas, on 1 August, the stock declined by 2.439% to close at $0.400. Over the past 12 months, the stock has declined by 14.89% including a negative price change of 9.09% in the past three months.


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