The company recently announced its quarter production results whose main highlights were that productions at all
three main operations Tropicana, Jaguar and Long were in line with the expectations. The company will soon announce its quarterly financial results.
Independence Group Portfolio (source - Company Reports)
IGO expects approximately 6Mt of ore to be processed during FY2015. The Company’s attributable gold production during FY2015 is expected to be in the range of 141,000 to 147,000 ounces with cash costs plus royalties in the range of $590 to $630/oz Au. IGO’s share of exploration is expected to be approximately $6 million on an annualised spend rate basis until December 2014, with an expected increase in spend in the calendar year 2015 (CY2015). IGO’s share of sustaining capital is expected to be approximately $9 million.
Financial Highlights (Source - Company Reports)
Production guidance for the Long Operation for FY2015 is 230,000 to 270,000 ore tonnes for production of between 9,000 and 10,000 tonnes of contained nickel. Payable cash costs plus royalties for FY2015 are forecast at $4.30 to $4.70 per payable pound of nickel, net of copper credits. Exploration at Long over the next 12 months will continue to test for extensions to existing deposits and for new deposits in the tenement area. Production guidance for the Jaguar Operation for FY2015 is 420,000 to 440,000 ore tonnes for production of 5,800 to 6,500 tonnes of copper metal, 40,000 to 43,000 tonnes of zinc metal and 1,000,000 to 1,100,000 ounces of silver metal in concentrate. Cash costs for FY2015 are forecast at A$0.40 to A$0.60 per payable pound of zinc, including royalty costs and net of copper and silver credits.
EBITDA by Mine (source - Company Reports)
The company had targeted an output in the range of 470,000 to 490,000 ounces of gold from the Tropicana gold mines in FY15. The company completed the ramp up of operations in the Tropicana Gold mine last year. The cost per ounce from this goldmine is expected to be in the range of $590 to $630 per ounce of gold. The company did production of 10,909 tonnes of contained nickel metal from Long Operation, 9% above the range of guidance in FY14. Similarly, the company did production of 41.162 tonnes of contained zinc metal from Jaguar Operation, 28.2% above the range of guidance in FY14. The payable cash cost including royalties and by product credits were $0.31 per pound zinc.
Independence Group Daily Chart (Source - Thomson Reuters)
A major focus for IGO in the 2015 financial year (FY2015) will be working with its joint venture partner, AngloGold Ashanti, on gaining additional operating efficiencies at the TGM. IGO’s attributable gold production from this project in FY2015 is expected to be in the range of 141,000 to 147,000 ounces at a cash cost plus royalties in the range of $590 to $630/oz Au. IGO’s attributable share of production from TGM is expected to provide substantial cash flows and profits to IGO during FY2015 and beyond.
IGO is expecting to spend in the order of $11 million on greenfields exploration and $26 million on brownfields exploration during FY2015. There has been a reduction in the total cost of the greenfields exploration program, compared with the previous year, due to a change in the nature of IGO’s priorities during FY2015 and an emphasis on brownfields exploration, permitting at the Stockman Project and identifying new, more advanced assets that will enhance the Company’s project pipeline.
The Company realised a $46.6 million Net Profit After Tax in the 2014 Financial Year (FY2014) (FY2013: $18.3 million), which included an abnormal non-cash impairment of $17 million. Underlying EBITDA increased to $174.8 million (FY2013: $56.8 million). Revenue increased to $399.0 million (FY2013: $225.9 million) primarily due to the addition of revenue from Tropicana. Net cash flows from operating activities increased to $153.6 million (FY2013: $67.5 million). At 30 June 2014 the Company had cash and cash equivalents of $57.0 million (2013: $27.2 million) and debt of $29.0 million (2013: $20.0 million), a net increase of $14.8 million since 30 June 2013, which is inclusive of the Tropicana project construction, spend. The Company announced a fully franked Final Dividend of 5.0 cents per share (FY2013: 1.0 cent). Total fully franked dividends paid during FY2014 were 4.0 cents per share (FY2013: 2.0 cents)
The company is currently trading at a stock price of $4.170, which is away from the 52 week high of 6.210 and close to the 52-week low of 3.510. The company is currently trading at a Price to Earnings ratio of 12.920 and a dividend yield of 2.67%. There are few companies in the sector are trading at a lesser P/E ratio (less than 12) and higher dividend yield (less than 3 %). The company has a net tangible asset per share value of $2.94.
Given the attractive Price to earnings ratio and the fact that company is on track to meet its production expectations, we believe that the stock is a buy at the current price of $4.170.