ADVISOR WATCHLIST
Tony Killer
Senior Investment Advisor – Equities tkiller @ burrell . com . au ( 07 ) 4153 4499
Nickel - Western Areas ( WSA ) is an Australian Nickel producer with operations at Flying Fox and Spotted Quoll mines . The recent quarterly production report advised that production for the first 9 months has reached 11.6kt of nickel concentrate and it is likely they will achieve the lower end of guidance of 16kt for the financial year . The spot price of Nickel continues to be strong and this is creating a more positive outlook for operations in 2022 and 2023 as they complete the Cosmos Project mine . This project is expected to see first ore in the September 2021 quarter , first concentrate around a year later in 2022 and not reach full production rates until the end of 2023 . The delivery of this mine on time and on budget is the key to WSA ’ s future as the Flying Fox and Spotted Quoll mines come to an end in the near future . I am not expecting any short term moves on Western Areas but with the shares down around the low $ 2 ’ s I am looking for upside as Cosmos is delivered next quarter . The cashflow that will commence from late 2022 and build into the 23 / 24 financial years and beyond will see potential capital growth for patient investors looking for Nickel exposure . Those looking for a larger exposure to Nickel are directed to Nickel Mines ( NIC ) who are producing strong free cashflow returns .
Copper – OZ Minerals ( OZL ) has been the absolute star performer with operations at Prominent Hill and Carapateena supplying both Copper and Gold into a strong commodity price cycle . With the price of Copper above US $ 4 / lb the cash generation at present is excellent and if this remains the case I expect we could see the consensus financials lifted substantially in the months ahead . The same applies for Sandfire Resources ( SFR ) which has not performed as well but is enjoying the same leverage to the higher Copper price .
Iron Ore – We all know about the BHP , RIO and Fortescue ( FMG ) operations and the incredible profits they are generating in this current iron ore price boom . Other winners have also included Mineral Resources ( MIN ) who have traditionally been known for the contract work they have provided the major miners as well as Hancock Prospecting . These companies are all well placed to continue making significant profits , but some of the smaller operators that have been able to get product to market are also worth a closer look if you are looking for a more speculative play . These include Champion Iron ( CIA ) which has a long life project in Canada that is moving from 7.5mtpa to 15mtpa , Mt Gibson ( MGX ) who are still mining Koolan Island for a few more years as well as other short term projects like Fenix Resources ( FEX ) with the Iron Ridge operation and potentially the Paulsens East project owned by Strike Resources ( SRK ). The risk / reward for companies like Strike and Fenix is whether the spot price of iron ore holds long enough for them to firstly get into production , but then enjoy the high profits from current prices . Fenix has sent its first few ship loads and is starting to recoup its upfront capital costs whilst Strike is yet to receive final Mining approval and is presently hoping to be in production by the end of calendar 2021 . I have a preference for Champion Iron at present but if the price of iron ore stays where it is for the balance of 2021 and stays strong in 2022 then all producers will continue to do well . More speculative players may want to have a very close read of the upcoming FEX quarterly report .
Beach Energy ( BPT ) will see upgrades to earnings through the 2021 – 2023 period as a result of a positive outcome from the partial award issued by the arbitrator for the supply of gas to Origin Energy from the Otway Basin . Another gas review between Beach and Origin is likely next year and I would expect that analysts may be upgrading their forecasts on the likely price that Beach will receive on that smaller contract as well . These price increases have been a consistent outcome from the Beach operations , particularly as so many legacy contracts roll over and are re-negotiated in a tighter supply market for domestic gas . As outlined in last months Bourse , I like the outlook for both Beach Energy and Senex ( SXY ). Cooper Energy
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