Company Overview: SSR Mining Inc. (ASX: SSR) is a gold mining company producing assets located in the USA, Turkey, Canada, and Argentina. SSR controls 80% of the shares of Anagold Madencilik Sanayi ve Ticaret Anonim Şirketi (Anagold), a company that holds Çöpler project. The company is focused on leveraging its robust balance sheet and proven track record of free cash flow generation to fund growth across its portfolio organically and to deliver superior returns to shareholders. SSR is listed on three stock exchanges – NASDAQ, the Toronto Stock Exchange, and the Australian Stock Exchange.

SSR Details

Financial Growth Supported by Diversified Asset Portfolio: SSR Mining Inc. (ASX: SSR) is a leading intermediate gold mining company with a global pipeline of high-quality development and exploration assets in the USA, Turkey, Mexico, Peru, and Canada. In September 2020, the company was admitted to the official list of ASX Limited, following the completion of its merger with Alacer Gold Corp. As on 13 April 2021, the market capitalisation of the company stood at ~A$4.42 billion. The company’s diversified asset portfolio is comprised of high-margin, long-life assets, including Çöpler gold mine in Turkey, Marigold mine in the USA, Seabee gold operation in Canada, and Puna operations in Argentina. Despite the challenging operating conditions caused by the COVID-19 pandemic, SSR was able to deliver decent operational and financial performance in FY20, with ~40.6% YoY growth in revenue and ~132.98% in net income (attributable to equity holders of SSR Mining). From 2016 to 2020, the company’s revenue and net income grew at a CAGR of 14.8% and 19.71%, respectively, demonstrating the strength of the company’s diversified asset portfolio.

Revenue & Net Income Trend (Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

Looking ahead, the company is focused on sustaining 700k to 800k gold-equivalent ounces of production for the next 5+ years. Further, the company is focused on making investments in high-return growth and providing sustainable capital returns to shareholders while maintaining peer-leading financial strength. With a healthy balance sheet and decent free cash flow, the company seems well placed to assess additional capital returns to shareholders in the form of supplemental dividends and share buy-back programs in the future.

Decent Revenue and Net Income Growth in FY20: For the year ended 31 December 2020, the company reported total production of 711,000 gold-equivalent ounces, which generated total revenue of US$853.08 million, up 40.58% on FY19. The revenue was driven by the increase in production as well as improved average realised gold price. The gold production from Çöpler, Marigold, and Seabee stood at 326,908oz, 234,443oz, and 81,686oz, respectively. From Puna operations, the company produced 5.6 million ounces of silver during the year. One of the significant highlights of FY20 was the completion of zero-premium merger with Alacer Gold, which transformed SSR into a leading intermediate precious metals producer with robust margins. Cash generated by operating activities stood at US$348.61 million in FY20, up by $145.84 million in FY19. Net income attributable to equity holders in FY20 stood at US$133.49 million, up by 132.98% on YoY. As at 31 December 2020, the company had cash and cash equivalents of US$860.63 million. The company recently paid its first quarterly dividend of US$0.05 per share, in-line with its recently instituted capital allocation policy.

FY20 Result Highlights (Source: Company Reports)

Key Metrics: For FY20, the company has reported improved profitability margins as compared to FY19. Gross margin for FY20 stood at 36%, up from 28% in FY19. EBITDA margin for FY20 stood at 43.8%, up from 37.7% in FY19. Net income for FY20 stood at 16.5%, up from 9.2% in FY19. Current ratio for FY20 stood 5.72x, up from 3.84x in FY19, demonstrating that the company has improved its ability to pay short-term obligations.

Past 5-year Financial Performance For Year Ending 31 December; Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

Rise in Mineral Reserves and Resources: As per the company’s updated Mineral Reserves and Mineral Resources report (as of December 31, 2020), SSR’s Gold Mineral Reserves have increased 5% to 8.0 million ounces, as compared to year-end 2019, primarily driven by additions at Çöpler. Further, SSR’s Measured and Indicated Gold Mineral Resources increased by 14% to 15.0 million ounces, resulting from increases at Marigold and in the Çöpler District. At Marigold, SSR’s Indicated Mineral Resources increased by 9% to 5.4 million ounces of gold compared to 4.9 million ounces at year-end 2019.

Key Risk: As an intermediate gold producer, SSR is exposed to the risks associated with the fluctuations in the prices of gold. Further, the company’s actual production, costs and financial returns may vary significantly from the estimates depending on a variety of factors, including mine failures, slope failures or equipment failures; industrial accidents; shortages of principal supplies needed for operations, etc.

Outlook: Moving forward, the company is focused on generating peer leading free cash flow and returning capital to its shareholders while prudently investing in and optimizing its assets. The company plans to advance its organic growth portfolio aimed at increasing production, reducing costs and extending mine lives from its near-mine, low capital intensity pipeline. It plans to return excess attributable free cash flow to shareholders through a two-tiered capital return structure with a recurring quarterly dividend primary method of capital return.

At its Puna operations, the company is continuing steady-state production with a focus on improving productivity. SSR intends to achieve and sustain mill throughput rates above 4,000 tonnes per day. At Seabee, the company intends to increase mining rates to exploit latent mill capacity. At Marigold operations, SSR’s major focus will be ongoing cost reduction and continuous improvement initiatives. At Çöpler, SSR is focused on flotation circuit construction, with expected ramp-up beginning mid-year 2021.

In FY21, the company expects its total production from all four operating mines to be in the range of 720,000 to 800,000 gold equivalent ounces at consolidated AISC of US$1,050 to US$1,110 per gold equivalent ounce. Total growth capital expenditure in FY21 is expected to be around US$87 million.

FY21 Production Guidance (Source: Company Reports)

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

** 1USD = ~1.31 AUD

Stock Recommendation: Over the last three months, the stock has corrected by 18.35% and is trading lower than the average 52-week price range of A$17.500 – A$33.520, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~A$18.375 and a resistance of ~A$23.062. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). We believe the company can trade at some premium to its peers, considering the company’s decent FY20 performance, expanded resource base, outlook, and improved gold price environment. We have taken peers like Regis Resources Ltd (ASX: RRL), Perseus Mining Ltd (ASX: PRU), St Barbara Ltd (ASX: SBM), etc. Considering the company’s decent operational and financial performance in FY20, diversified asset portfolio, FY21 production guidance, modest outlook, current trading level and valuation, we give a “Buy” recommendation on the stock at the current market price of A$19.73, down by 1.890% as on 13 April 2021.

SSR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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