Company Overview: Tribune Resources Limited is an Australia-based company engaged in the development of exploration, development and production activities at its East Kundana Joint Venture (EKJV) tenements. The Company's EKJV is located approximately 20 kilometers west northwest of Kalgoorlie and approximately 50 kilometers northeast of Coolgardie. Its Japa Concession is located in the Western Region of Ghana, approximately 110 kilometers southwest of Kumasi and approximately 50 kilometers north of Tarkwa, and the concession covers approximately 27.52 square kilometers within the Akropong Belt within the Birimian Supergroup that hosts the Ashanti type lode-gold deposits of West Africa. The Company also operates West Kundana Joint Venture, Mt Celia Project and Seven Mile Hill in Western Australia. The Company's subsidiaries include Tribune Resources (Ghana) Limited, Mount Manning Resources Limited, Melville Parade Pty Ltd and Rand Mining Limited.
 

TBR Details
 
Outstanding CAGR for Top-line and Bottom-line for FY15-19: Tribune Resources Limited (ASX: TBR) is involved in the exploration, development and production activities at its core project East Kundana Joint Venture tenements. The East Kundana Joint Venture (EKJV) is located 47 km north east of Coolgardie and 25 km west north west of Kalgoorlie. The EKJV is between Tribune Resources Limited (36.75%), Rand Mining Limited ('Rand') (12.25%) and GiltEdged Mining Pty. Ltd. (51%), a wholly-owned subsidiary of Northern Star Resources Ltd. Other explorations of the company are West Kundana Joint Venture (Tribune's interest 24.5%), Seven Mile Hill (Tribune's interest 50%) and Tribune Resources Ghana Limited (Tribune's interest 100%).

Looking at the past performance over FY15 to FY19, total revenue and net income of the company have grown with a CAGR (compounded annual growth rate) of 42.78% and 49.21%, respectively. Group’s total revenue improved from $87.8 Mn in FY15 to $364.9 Mn in FY19, and net income improved from $7.0 Mn in FY15 to $34.7 Mn in FY19.

TBR has shown substantial improvement in FY19 financials as compared to the previous year. As per the cash flow statement, net cash from operating activities for FY19 was reported at $227.64 million, as compared to $53.26 million in the previous year. Net cash used in investing activities for the period was reported at $38.52 million, as compared to $40.06 million in the previous year. Net cash used in financing activities for the period was reported at $143.12 million, as compared to $13.52 million in the previous year.

On the backdrop of a stable outlook for the yellow metal (Gold), global gold producers and miners are expected to boost their earnings in the coming times.
 

Historical Performance of TBR (Source: Company Reports)

December’19 Quarter Key Highlights: Kanowna Plant, Greenfields Mill and Lakewood Mill produced 223,191 tonnes of EKJV ore, 58,250 tonnes of EKJV ore and 30,267 tonnes of R&T ore, respectively. With interest of 75%, 23,494 ounces of gold and 4,050 ounces of silver were credited to Rand and Tribune Bullion Accounts.

Raleigh Underground Mine under EKJV reported the continuation of stope production from the 6102, 6067, 6031, 5983, 5949 and 5795 levels. At the end of the quarter, the bottom of the Raleigh Decline was reported at 5608 m RL, 737 m from the surface, the top of the Sadler Incline remains at 5989 m RL, 356 m from the surface and the bottom of the Sadler Decline remains at 5944 m RL, 401 m from the surface.

During the quarter, the EKJV incurred mine operating costs of $162 per tonne mined or $610 per ounce mined, as compared to costs of $170 and $739 in the September’19 quarter, respectively.

Rubicon Underground Mine reported continuation of stope production from the 5915, 5875 to 5815 and 5775 levels, the Hornet 5825 to 5745 levels, the Pegasus 6270, 6250, 5930, 5910 and 5870 to 5790 levels and the Pode 6203, 6043 and 6200 levels continued during the quarter. The EKJV incurred Mine operating costs, for Rubicon and Hornet at $112 per tonne mined or $645 per ounce mined, as compared to $123 and $678 in September’19 Quarter, respectively. Mine operating costs, for Pegasus was reported at $114 per tonne mined or $749 per ounce mined, as compared to costs of $119 and $786 in September’19 quarter, respectively.

The Board of Directors paid a (fully franked based on a tax rate of 30%) dividend of 20 cents per ordinary share on 25 October 2019.


TBR’s Stockpile Data (Source: Company Reports)

Cash Position at the end of Dec’19 Qtr Stood at $27.27 Mn: Net cash outflow from operating activities for the quarter was reported at $18.07 million, where production expenditure stood at $27.57 million and income tax payment comprised of $45.19 million. Net cash inflow from investing activities for the period was reported at $1.36 million. Net cash outflow from financing activities for the period was reported at $18.43 million. Cash and cash equivalents at the end of the period were reported at $27.27 million.


Net Operating Cash Flow Statement (Source: Company Reports)

FY19 Key Highlights for the period ended June 30, 2019: Revenue for the period was reported at $364.68 million, as compared to $179.93 million in the previous year. Profit after income tax for the period was reported at $72.26 million, as compared to $54.42 million in the previous year. Diluted earnings for the period was reported at 65.23 cents per share as compared to 84.17 cents per share in the previous year.

Under balance sheet, cash and cash equivalents at the end of the full year period was reported at $59.16 million, as compared to $13.16 million in the previous year. Trade and other receivables for the period was reported at $5.39 million, as compared to $2.26 million in the previous year. Trade and other payables for the period were reported at $19.13 million, as compared to $20.09 million in the previous year.

 

FY19 Income Statement (Source: Company Reports)

Recent Updates:

(a) On February 3, 2020, the company provided an update on underground mining activities at the East Kundana Joint Venture (EKJV), where TBR holds interest of 36.75%. Due to significant seismic response following the firing of stoping panels in the southern mining area of Raleigh during January 2020, the Raleigh underground mine will be placed on care and maintenance in April 2020. No fatal incidence was reported at the time of the firing. The southern mining area has now been excluded from all underground activity and deemed unsafe.

(b) In another update on proceedings against Northern Star Resources Ltd, the company informed the market that a hearing was held on 24 January 2020 at the Supreme Court of Western Australia. As per the hearing, NST agreed to the making of orders allowing Tribune to stockpile its share of surplus ore on the EKJV tenements until it could be removed for processing at third party facilities. NST also offered undertakings in relation to mechanism for the construction of ore stockpiles.

(c) On February 5, 2020, the company announced about its intention to buy back up to a maximum of 4,900,000 ordinary fully paid shares, as the current share price is not reflecting the precise underlying value within the company’s assets. The share buy-back provides an opportunity to add value to the remaining shares on issue and is expected to go for a period of 12 months on the specified terms, starting from February 21, 2020. As per the company’s closing share price of $4.85 on February 4, 2020, the return equates to around $23.76 million, however, the actual purchase will be subject to market conditions.

 
Top 10 Shareholders: The top 10 shareholders have been highlighted in the table, which together form around 99.68% of the total shareholding. Evolution Mining Ltd. and Trans Global Capital Ltd.hold maximum interests in the company at 19.90% and 15.23%, respectively.


Top 10 Shareholders (Source: Thomson Reuters)

A Quick Look at Key Metrics: Its gross margin, EBITDA margin and net margin for FY19 stood at 54.9%, 43.4% and 19.8%, respectively, better than the industry median of 43.4%, 29.5% and 10.9%, implying decent fundamentals for the company. ROE for FY19 stood at 16.6%, better than the industry median of 12.0%, which implies that the company generated a better return for its shareholders than its peer group. Current ratio for FY19 stood at 3.43x, better than the industry median of 1.83x, implying a decent liquidity position for the company. Its return on invested capital for FY19 stood at 32.5%, better than the previous year.


Key Metrics (Source: Thomson Reuters)

Key Risks: The company’s activities are exposed to a variety of financial risks such as market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk.

Gold Outlook: At the time of writing, the gold spot (XAU/USD) traded at US$1654.30 (16:25 (UTC+11)). Recent macro-economic concerns such as novel coronavirus (COVID-19) is acting as salt on wound in the current slowness in global economic growth. Moreover, lower corporate earnings and lower interest rates are not justifying equity upside rally leading to an overvaluation scenario. On technical analysis, the gold spot price is trading above 20 EMA, 50 EMA and 200 EMA, indicating bull strength. The rise in gold price is expected to help the gold producers and miners globally.


Monthly Chart for Gold Spot Price (XAU/USD) (Source: Thomson Reuters)


Key Valuation Metrics (Source: Thomson Reuters)

Technical Analysis of TBR:

Monthly Chart:

(Source: Thomson Reuters)

Weekly Chart:

(Source: Thomson Reuters)

The stock is trading above 200 EMA, indicating bullish stance at the current juncture. Moreover, on monthly chart, the current candle stick has shown strong rejection by forming “Hammer” type candle stick pattern, supporting the end of downside momentum (final confirmation of the monthly candlestick will be on February 28, 2020). Stochastic oscillator on the monthly chart also suggests that the stock is in oversold region, proffering an opportunity for investors. The stock is expected to test the resistance level at $6.553 (Fibonacci Projection level of 38.2%), break-on which next challenge can be expected at level $7.164 (Fibonacci Projection level of 50.0%).

Note: EMA – Exponential Moving Average

Stock Recommendation: The company’s stock posted a positive one-year return of 40.11%, while in the span of six months, the stock generated a negative return of 28.54%. The company is operating in several projects with significant interest, along with its core operation at EKJV, which are expected to enable the company to receive substantial share in the production and post decent earnings in the coming period. Moreover, its performance for financial year 2019 was satisfactory, with decent profitability margins and liquidity ratios. Additionally, TBR’s conflict of interest with Northern Star Resources Ltd is turning in its favor as NST agrees to allow TBR to stockpile its share of surplus ore on the EKJV tenements. Considering the company’s business model, December’19 quarter results, FY19 performance, gold outlook, and  current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$5.510 per share, down 1.254% on February 25, 2020.
 

TBR Daily Technical Chart (Source: Thomson Reuters)

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