Date of Data Capture: 17/7/2019
Name: INDEPENDENCE GROUP NL (IGO)
Classification: Integrated Mining
Current Price: $5.19
Market Capitalisation: $3.07B
Forecast EBITDA Growth: 23.55%
Yield Estimate: 1.39%
Consensus Price Target: $5.05
# Covering Analysts: 13
Premium at Current Price: 2.70%
Price Target Trend (3-Month): Up-Flat +6.32%
Signal Timeframe: Quarterly-Monthly-Weekly
Trend Bias: Up-Down / Long-Medium
Focus: Capital Growth
Set up Notes:
• Gold, nickel and zinc miner IGO is moving up within both a medium and long-term uptrend (medium pictured here) showing good technical momentum combining well with strengthening fundamental performance and good forecasts.
• Very strong earnings gains in 2018 were driven by a big jump in sales, firmer margins and significant debt reductions – the tough times over the last 10 years have transformed the company and it is looking lean and mean here.
• Major 9-year linear resistance broke at the outset of 2018 and after working through an intermediate down-cycle, pricing now looks ready to move higher after important structural resistance ceiling at $5 broke earlier this week.
($): 5.00, 4.75, 4.50, 4.25 & 4.00.
($): 5.25, 5.50, 6.00, 7.00 & 8.00.
Growth Focus: INDEPENDENCE GROUP NL (IGO)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
While it is true that flags do represent ‘independence’ in a number of countries around the World, here we are following the technical resistance break of a nine-year ‘pennant’ charting pattern as Independent Group pushes higher on surging nickel pricing, strengthening performance and excellent forecasting.
Listing on the ASX in 2002, IGO has experienced a volatile mix of fortunes in its time, but has nevertheless grown to become a leading Australian integrated miner, producing nickel, gold, silver, copper and zinc. The company has growing exposure to high potential growth metals like cobalt (in addition to nickel and copper) in-line with the companies stated strategy of being a “globally relevant supplier of metals critical to clean energy and energy storage.”
Independence is active in exploration, with new landholdings being added this year, as well as the expansion of existing projects, recently seen with upgrades to its copper, cobalt, gold and nickel assets. A key driver of future growth is seen not just in successful mining and exploration, but also in the development of its ‘IGO process’ where the company is pioneering a method of processing of nickel sulphate, with the potential to improve efficiencies while reducing emissions and waste, with expectations for this process to bring operating costs into the lowest comparative quartile against competitors.
Performance has been volatile, with the company coming through a series of tough patches, but since 2016 we have seen consistently increasing sales, earnings and profits with strong forecasting showing expectations for this to continue out to 2021. Analyst coverage offers up a strong majority positive consensus view and while the current valuation shows only a small discount to target pricing, these targets have been rising sharply in 2019.
Pricing tells an interesting tale here with IGO making an all-time high peak in February 2008, before entering into the GFC with steep declines and an ongoing series of long multi-year trends in the time since. There has been a ceiling of linear resistance capping the stock on every rally within a 9-year pennant pattern of constricting decline. Importantly, this ceiling broken at the start of 2018, before pricing retreated within a medium-term pullback, but is now setting up with good momentum and positive signalling across multiple timeframes.
With price breaking through structural resistance at $5.00 just last week, we see this as an exciting technical setup, backed by world-class assets in strengthening metals, operating a low cost base with a strong balance sheet, and we think this nickel and gold play could really gain some lustre here.