Twelve ASX resources juniors actually digging up stuff and selling it
Mining & Resources
There aren’t too many “producers” at the junior end of the market — miners who are actually digging up stuff and selling it as opposed to exploring.
But resources stocks that have moved on to production are the ones usually worth watching.
There are about 600 ASX-listed small and micro cap resources stocks with a market cap of less than $300 million. (Here’s a list of the top 100 based on last year’s share price growth).
The vast majority are still in the explorer stage.
But here are 12 that are actually producing. (Though not all are showing positive cashflow, as a scan of the June quarterly results shows).
Lucapa Diamond (ASX:LOM) is continuing to reap the rewards of its strategy of mining and selling high value diamonds.
A 27 per cent higher mining volume at the Lulo project in Angola in the June quarter upped the $120 million company’s diamond production by 20 per cent to 5058 carats.
That contributed to a 6 per cent increase in sales revenue to $US5 million ($6.8 million) at an average price of $US1479 per carat. (Although Lucapa has not actualy banked any of that cash yet according to cashflow statements).
Mark Drummond, Lucapa’s head of investor relations, told Stockhead Lucapa was fetching prices almost 15 times the global average.
“The thing about diamonds, unlike gold or copper, is you might produce the same amount of carats of diamonds … but diamonds are different in that they are valued individually,” he said.
“So it’s the quality of those diamonds which determines your sale price. The world average for a carat of diamonds produced is around about $US100.
“The price that is being achieved for these high-value diamonds has essentially never been better. So it’s a good area of the diamond market to be in.”
On top of its sales so far this year, Lucapa has increased its diamond inventory 61 per cent to 2755 carats, including large and high-value specials that are being held for later sale.
Lucapa’s shares didn’t move on the news, remaining steady at 26c on Wednesday.
With coal prices picking up, Universal Coal (ASX: UNV) told investors earlier this week that it made record quarterly earnings.
EBITDA earnings hit a $21.4 million high as the $143 million company exported more coal from its New Clydesdale colliery, and also took advantage of higher coal prices.
Exports were up 16 per cent, domestic sales by 1 per cent, and Universal has $36.8 million in cash.
Others small cap explorers that have moved into the production phase include:
— Iron ore producers Atlas Iron (ASX:AGO) and Mount Gibson Iron (ASX:MGX)
— Mineral sands producer Base Resources (ASX:BSE)
— Gold producers Blackham Resources (ASX:BLK), Millennium Minerals (ASX:MOY), Doray Minerals (ASX:DRM)
— Alkane Resources (ASX:ALK) is producing gold but is still in the development phase for rare earths
— Coal player Stanmore Coal (ASX:SMR)
Atlas Iron — which is the subject of a takeover by Gina Rinehart’s Hancock Prospecting — is feeling the pinch of market conditions and has been forced to dip into its pocket and cut back production.
The company reported earlier in July that its cash on hand dropped from $64 million to $57 million in the June quarter due to negative operating margins, a $3.12 million break fee it had to pay for backing out of its planned tie-up with Mineral Resources (ASX:MIN) and timing of shipments late in the month.
Blackham‘s bottom line, meanwhile, is being pinched by a 38 per cent hike in costs during the June quarter.
Alkane Resources grew its cash and bullion to $80 million in the June quarter – an increase of $11 million on the prior quarter.
The company met its quarterly target with the production of 19,135 ounces – a nearly 3 per cent increase on the prior quarter – from its Tomingley gold project.
Gold sales totalled 19,163 ounces for revenue of $33.2 million at a higher quarterly average price of $1735 per ounce.
Alkane’s goal is to have around $100 million in cash on its balance sheet to fund a large chunk of its share of the cost of developing its Dubbo rare earths project in central NSW.
Shareholders liked the quarterly result, adding 4.7 per cent to the company’s share price, which closed Wednesday at 22.5c.
Oil rakes in the dough
On the energy side, more of the oil guys are seeing the green roll in.
Oil prices received a boost during the June quarter, largely due to supply cuts that saw the Brent crude price hit nearly $US80 a barrel in May – a 27 per cent increase since mid-February. It is currently trading around $US74 a barrel.
“The single biggest reason behind that price hike has been general supply tightness after OPEC and Russia and some other producers decided to reign in production by about 1.8 million barrels per day,” said Mriganka Jaipuriyar, Associate Editorial Director, Asia Energy News & Analysis for S&P Global Platts.
“So from a surplus way above the five-year average levels, they are now at slightly below five-year average levels, and that supply tightness and continuous production cuts from OPEC members and the non-OPEC suppliers is what led to the prices gradually rising.”
Horizon Oil (ASX:HZN) gained 18 per cent to trade at 13c after it told investors it made 65 per cent more revenue in the June quarter.
The company reported quarterly revenue of $US39.6 million after it increased oil sales by 54.4 per cent to 599,370 barrels at an average price of $US72.23 per barrel – well above the company’s cash flow break-even price of $US38 per barrel for the 2018 financial year.
Horizon produces oil from the Beibu Gulf fields in China and the Maari and Manaia fields in New Zealand, where it recently upped its stake by a further 16 per cent.
Meanwhile, Otto Energy (ASX:OEL) says it expects to keep receiving “substantial cash flows” from its 50 per cent owned SM 71 oil field in the Gulf of Mexico.
Production only started from the F1 well in March and the F3 well in April.
Otto’s oil and gas sales for the quarter totalled 165,120 barrels of oil and 121.6 million cubic feet of gas.
This earned the company $US11.2 million in revenue before royalties and operating costs – marking an 1886 per cent increase in oil revenue and 2720 per cent spike in gas revenue.
Otto’s closing cash balance for the June quarter was $US5.9 million.
Shares climbed as much as 5.2 per cent to trade at an intra-day high of 6.1c on Wednesday.