Evolution Mining Limited

EVN has received regulatory approval on October 26, 2018 from the NSW department of planning and Environment for its Cowal Gold Operation near West Wyalong in NSW to commence construction of the Galway –Regal –E46 exploration decline.

Investment Rationale:

Strong long-life asset portfolio: Average reserve life for the group extended to beyond 9 years. Exploration success at Cowal, Mungari and Cracow delivered organic growth. Projects remained well on schedule and within the budget.

Strong financial Performance: Statutory net profit was reported to be A$263.4 million, backed by strong operating cash flow of A$811.8 million and net mine cash flow of A$539.9 million after taking into consideration all sustaining and major project capital expenditure. Net debt was reduced to A$71.8 million from A$325.8 million during the period.

Technically, the scrip made 52 weeks high at the levels of $3.615 in the month of June-2018. The scrip showed some retracements in the month of August and September. In short term, levels of $2.61 played minor support level. At current juncture, the scrip is trading above the mean deviation of the Bollinger bands with a bullish candle. Major indicators indicate bulls taking strength over sellers.

The market cap of EVN was recorded at $5.29bn, with price to earnings ratio (P/E) of 20.04x as on October 29, 2018. At current juncture, scrip is trading at the price levels of $3.16, and strong financial performance along with reduced debt and improved production levels with on-going projects well in schedule and within budget, exhibit a good investment opportunity. We maintain a “Buy” on the stock at the current price levels of $3.16.
 

OceanaGold Corporation

The company presented its third quarter results on October 26, 2018. At the end of the third quarter, the Company entered into new undesignated gold hedges to cover future gold production from Macraes for the period of 1 January to 31 December 2019.

Moderate Financial Performance: 9% decrease in revenue on Q-o-Q basis on account of lower average gold prices was noted. Sales of 3.9k oz was reported during the period well below the production.  EBITDA margin recorded strong growth, but higher COGS and lower prices maintained the EBITA margins on lower side on quarter on quarter basis (Q-o-Q). Unfavorable working capital movement of approximately $13m was reported during the period. The cash balance was $69.7 million including a discretionary repayment of $50 million towards the revolving credit facility during the third quarter.

Growth from Projects: At Haile, under its plan for the expansion of the process plant, the Company completed the construction and fully commissioned the pebble crusher. Due to lower mill utilization from the planned shutdown at the site, company reported decreased Q-o-Q production. Mine productivity  was impacted by lower excavator availability and unsupportive weather conditions.

The Company continued to develop the second underground mining panel at Didipio while ramping up production from the underground during third quarter. Reported steady production on Q-o-Q, posted increased mill feed but slight decrease in head grade was recorded during the quarter. At Waihi, the Company continued to advance the permitting of the 10-year mine life extension with additional consultations and engagement with local stakeholders. 

Technically, the scrip is forming a bearish piercing candle on the charts with a long wick on the upside indicating rejection on any upside move for the time and some dip might occur in near term. Levels of $3.56-$3.2 will play major support zone in the near term and closing below these levels can take the scrip further down. At current juncture, scrip is trading at the upper end of the Bollinger band with rejection to any significant upside move.

The market cap of OGC was recorded at $ 2.61 billion, with price to earnings ratio (P/E) of 10.09X. At current juncture, moderate financials along with current price levels trading at upper zone of Bollinger  bands on technical charts, exhibit a “Hold” at the current price levels of $4.12, down 2.4% on October 29, 2018.
 
 

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