St Barbara Ltd
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SBM Details
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Higher Valuations: The shares of St Barbara Ltd (ASX: SBM) rallied over 15% on June 06, 2016 even though there is no specific update from the group, on the back of recovering gold prices and falling US dollar. Moreover, the growing uncertainty in the global markets due to major events like Fed rate hike and Brexit outcome is also pushing the gold related stocks higher. SBM stock rallied over 137.1% (as of June 03, 2016) in the last six months driven by its strong production outcome coupled with stable outlook from Moody’s Investors. The group also enhanced their consolidated FY16 gold production forecasts in the range of 369 to 384 koz as compared to their earlier estimates of 354 to 379 koz. The group’s third quarter gold production reached 92 koz, which is better than the expectations. On the other hand, we believe that the heavy rally in the stock placed SBM at higher valuations.
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Recommendation: We give an “Expensive” recommendation on the stock at the current price of $3.02
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Consolidated gold production (Source: Company Reports)
Northern Star Resources Ltd
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NST Details
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Metallurgical programme update: Northern Star Resources Ltd (ASX: NST) stock rallied over 14.4% on June 06, 2016 at par with its peers as well as the group’s update regarding its metallurgical programme. The group as well as Beacon Minerals expect that the expanded programme would be finished by the end of this month while the results from the metallurgical recovery work would form the basis for the payment terms. Moreover, NST already rallied over 79% in the last six months (as of June 03, 2016) driven by the rising gold prices coupled with the group’s forecasts of a solid production growth and flat cost environment. But this rally has placed NST at higher valuations and trading at an unreasonable P/E while the group has a low dividend yield.
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Recommendation: We give an “Expensive” recommendation on NST at the current price of $4.85
Newcrest Mining Limited
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NCM Details
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Low Enterprise Value to Reserve ratio: Newcrest Mining Limited (ASX: NCM) rallied over 11.6% on June 06, 2016 on track with its peers as lower than estimates jobs data in the US led to a heavy gold rally and fall in the dollar. On the other side, NCM is still among the major low cost producer with CY 2015 AISC per ounce of $761 and has a solid reserve life of over 28 years. The group has been enhancing its production guidance since the last eleven quarters given their continuous exploration success and organic growth across its projects like Lihir, Cadia and Golpu. The group’s Enterprise Value (EV) to Reserve is very low as compared to its peers like Northern Star Resources.
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Recommendation: We maintain our “Hold” recommendation on this stock at the current price of $22.06
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NCM Enterprise Value (EV) to Reserve (Source: Company Reports)
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