Six Ultra Exciting Gold Stocks

Newcrest Mining Ltd


NCM Details

Long reserve life with low cost production: Newcrest Mining Ltd (ASX: NCM) has strong gold reserve base with average reserve life of 28 years. NCM is among a major low cost producer in the world. NCM AISC per ounce was at $753 for nine months ended on March 2016. The group’s net debt/ EBITDA is at comfortable 2.1x at December 2015 while cash balance is at USD 2.4 billion. Its Cadia mine has gold reserves of 26 moz with 41 years reserve life and also has copper reserves. Lihir mines has gold reserves of 28 moz with average life of 35 years. The group’s focus on operational efficiency is reflected in its EBITDA for the first half of 2016 which came at 35%, down from 40% in prior corresponding period (pcp) while EBIT and AISC margins were at 12% and 31% respectively. The planned capex for FY16 is at USD 440-540 million. NCM recently reported that their mine production resumed at Kencana mine as a part of the Gosowong operation. For FY16, the group had guided for total gold production of 2.4 – 2.6 million tonne. NCM stock has generated 67.2% return in past six months (as on June 22, 2016) and we give a “Hold” on the stock at the current market price of $21.64
 

NCM Daily Chart (Source: Thomson Reuters)
 
Evolution Mining Ltd


EVN Details

EBITDA margins continue to expand: Evolution Mining Ltd (ASX: EVN) has been improving its EBITDA margins on the back of better asset quality, cost reduction and surging gold prices. It has emerged as the lowest cost quartile of global producers. Additionally, March 2016 quarter shows net mine cash flow of A$105.8 million which is used in repayment towards $237 million debt. Favorable gold prices, ongoing cost reduction efforts and increased volumes from its Cowel and Mungari mines would help the rise in cash flows to the group.
 

EVN’s improving margins (Source: Company reports)
 
Meanwhile, Emmerson Resources Ltd and EVN reported outstanding shallow drill program result at Edna Beryl West mine which include 5 m at 27g/t gold and 13m at 8.7g/t gold indicating shallow high grade gold deposits. Meanwhile, EVN stock generated 52.31% returns in last six months (as ofJune 22, 2016) but we believe the stock is at unreasonable valuation at current levels and trading at a higher P/E with a low dividend yield. We rate the stock “Expensive” at the current market price of $2.19
 

EVN Daily Chart (Source: Thomson Reuters)
 
Northern Star Resources Ltd


NST Details

Strong financial position: Northern Star Resources Ltd (ASX: NST) recently reported that Tanami Gold Ltd (JV Partner with NST for the Central Tanami Project) could identify significant results from the drilling at Groundrush deposit with completion of drilling of 118 holes with over 27,000 metres of diamond drilling and 11,000 metres of RC drilling. NST has built a strong balance sheet with $286 million in cash and virtually no debts as on March, 2016. The company generated operating cashflow of $103 million as on March 2016. NST has FY16 target of 570-koz productions at AISC of $1050/oz and 700 koz in 2018 with Central Tanami Project commencing production in CY17 to ramp up to 75 kozpa by FY19, Kanowna production growing to 125 kozpa with the inclusion of 100% Kundana tenements, satellite deposits and the Velvet discovery at the end of CY16 and Hermes open pit starting in FY17.
 

NST Production estimates (Source: Company reports)
 
The Group is also considering the divestment of Plutonic mine, which has FY16 guidance of 75-80 koz at AISC of $1350-$1400/oz. Accordingly, the stock hit a new 52-week high and has generated over 62.18% returns over the past six months (as of June 22, 2016). The stock is trading at high P/E. We believe the stock is “Expensive” at the current price of $4.57
 

NST Daily Chart (Source: Thomson Reuters)
 
OceanaGold Corp


OGC Details

Acquisition and organic growth strategies: OceanaGold Corp (ASX: OGC) acquired Romarco Minerals, the lowest cost gold producer for ~$416 million and high –grade, low cost Waihi Gold mine at a consideration of $101 million. Meanwhile, the company is also focusing on low cost organic growth, and has advance development of Haile Gold mine and Didipio. OGC undertook a development of power grid connection at Didipio. The company recently reported exploration updates with drill results at Haile continuing to demonstrate a high-grade resource.  Intersections at Horseshoe have increased the confidence in the upper zone and include 58 metres @ 17.5 g/t, 50 metres @ 18.7 g/t, 61 metres @ 13 g/t, 17.1 metres @ 11.4 g/t and 31.7 metres @ 9.5 g/t. Drill results at Waihi also demonstrated resource expansion opportunities with significant gold intersections at Waihi including 4.8 metres @ 17.5 g/t and 5.1 metres @ 8.2 g/t from Correnso Deeps, 2.9 metres @ 21.3 g/t and 3.1 metres @ 20.6 g/t from Daybreak, 3.0 metres @ 35.7 g/t, 3.0 metres @ 9.9 g/t and 6.0 metres @ 14.7 g/t, 2.4 metres @ 10.9 g/t and 2.6 metres @ 5.6 g/t at other nearby veins. OGC also reported that exploration activities have commenced in the broader FTAA area in the Philippines with drilling scheduled to commence in the third quarter of 2016. OGC reported for achieving consolidated gold production of 122,782 ounces with record quarterly gold production of 46,811 ounces at Didipio for the first quarter of 2016. Consolidated All-In Sustaining Costs of $716 per ounce and cash costs of $436 per ounce on sales of 117,387 ounces of gold and 4,745 tonnes of copper were also reported. Further, revenue of $161.1 million with an EBITDA of $77.9 million and a net profit before undesignated hedges of $36.7 million was reported for the first quarter result. The company has earlier given FY16 gold production guidance at 130 -145 koz and estimates copper production of 19,000-21,000 tonne. OGC has planned $30 million exploration program for 2016 at United States, New Zealand and Philippines. On the other hand, the stock has already generated over 73.81% returns over the last six months (as of June 22, 2016) and currently trading at higher P/E. We rate the stock as “Expensive” at the current market price of $4.65
 

OGC Daily Chart (Source: Thomson Reuters)
 
Gold Road Resources Ltd


GOR Details

Gold reserves’ findings: Gold Road Resources Ltd (ASX: GOR) lately announced about the initial programme of diamond drilling at YAM14 prospect with high-grade primary gold mineralization intersected in a discrete shear zone below the previous reverse circulation drilling. Diamond drill hole 16DHDD0002 has been intersected 3.05 metres at 4.89 g/t Au from 137.68 metres in a strong sulphide alteration assemblage. There is also an update that the Environmental Protection Authority of Western Australia (EPA) published its level of assessment decision on the Company’s Gruyere Gold Project referral wherein GOR was advised that EPA will assess the project as Assessment on Proponent Information (API) Category A. The company also confirmed that Bedrock drilling at Yaffler has gold mineralization in prospective quartz dolerites. Additionally, the group reported that they witnessed a high grade intersection at Santana Prospect wherein the bedrock drilling at the Sun River- Wanderrie Camp has identified gold mineralization in at least four prospects. Meanwhile, the Group has sold its MT Gill and Kurrajong projects tenements to focus on its recent gold discovery. The company has raised $74 million equity by way of placement and 1 for 10 accelerated non-renounceable pro-rata entitlement offer. Accordingly, the stock generated over 54.67% returns in last six months (as of June 22, 2016) while we give a “Buy” on the stock at the current market price of $0.575
 

GOR Daily Chart (Source: Thomson Reuters)
 
Independence Group NL


IGO Details 

Diversified portfolio of high margin assets:Independence Group NL (ASX: IGO) has a diversified portfolio of high margin assets which includes three operating mines and one under construction mine in Western Australia having Gold, Nickel, Zinc, Coper, Cobalt and Silver reserves. The company has undertaken the expansion and resources extension at Nova Nickle/ copper project construction and Tropicana mill expansion and resource extension. Tropicana has potential to extend mine life beyond initial 10 years. Independence Group reported that the gas project at Tropicana is well-progressed and 292 km pipeline is already completed. The group’s prestigious Nova project is expected to start production in December 2016. IGO even exercised Lake Mackay option that they entered with ABM in 2013 for $1.5 million. For March quarter, the Group reported cash and bullion of $40.8 million and has a debt of $240 million.


Diversified asset portfolio (Source: Company reports)
 
The operating cash flow was at $4.1 million after $4 million on exploration expenditure. IGO’s Greenfield exploration is planned at $6-$8 million. Meanwhile, the recovery in commodity prices led the stock rise by 27.27% in last six months (as on June 22, 2016) and we give a “Buy” on the stock at the current market price of $3.14
 

IGO Daily Chart (Source: Thomson Reuters)

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