St Barbara Limited

SBM Details

Q1FY22 Financial Performance: St Barbara Limited (ASX: SBM) is a gold exploration and production company with operations in Australia, Papua New Guinea, and Canada. The company’s assets include Leonora operations in Western Australia, Canada, Atlantic Gold Operations in Nova Scotia, and Simberi operations in Papua New Guinea.

• Production Summary: For the Q1FY22, SBM registered total gold production of 67,000 ounces. On sequential basis, the production stood low as the Simberi operations remained offline. Additionally, the production from Leonora operations surged by 15% QoQ to 51,757 ounces.
• Cost Efficiency Improved: The group All-in Sustaining Cost (AISC) edged down by a substantial 8% QoQ to $1,492/ounces, primarily due to surged gold production from Leonora.
• Exploration Update: During the quarter, the exploration at both Simberi and Leonora have presented resilient results, suggesting upside in the company’s brownfield portfolio.
• Transforming via Building Brilliance Program: During the quarter, the company’s transformation program delivered cash benefits of $23 million.

Production Summary, Analysis by Kalkine Group

Key Risks and Challenges

• Gold Price Volatility: SBM is highly susceptible to gold price movements which can drain the top-line substantially.
• Changing Regulatory Requirements: As SBM’s operations are subject to multiple jurisdictions, its operations are exposed to high regulatory risks.

Outlook

SBM is expected embark upon gold production of 60,000 – 70,000 ounces with AISC to range between $2,465 and $2,650/ounce. SBM expects to consume $15-20 million in sustaining capex and $25-35 million in growth capex.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: 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.

Stock Recommendation

The stock of SBM gave a negative return of ~50.00% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $1.255 - $2.660. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at a slight discount to its peers, considering potential high volatility in gold prices amidst COVID-19 uncertainties. For valuation, few peers like Regis Resources Ltd (ASX: RRL), OceanaGold Corp (ASX: OGC), Resolue Mining Ltd (ASX: RSG) have been considered. Given the expected benefits reaped from Brilliance program, improved production at Leonora operations, reduced AISC, current trading levels, and upside indicated by valuation, we give a “Buy” recommendation on the stock at the closing market price of $1.295, down by ~3.359%, as of 02 December 2021.

SBM Daily Technical Chart, Data Source: REFINITIV

Tribune Resources Limited

TBR Details

Q1FY22 Operational Update: Tribune Resources Limited (ASX: TBR) is engaged in the extraction and development of gold through its Diwalwal project in the Philippines and Japa in Ghana. TBR also operates in the East Kundana Joint Venture (EKJV).

• Ore Processed: In Q1FY22, Rand and Tribune toll processed around 138,407 tonnes of ore from EKJB operations at 4.06g/t at two process plants in the district. TBR’s share equates to 103,805 tonnes.
• Exploration Activities: Exploration drilling and Resource definition and continued at the Japa Project in Ghana in 51 holes with 6,078 meters drilling.
• Diamond core drilling: The Diamond core drilling stands completed, and the drill rig demobilized during the first week of July 2021 at the Diwalwal Gold Project.

FY21 Financial Performance

• Operational Metrics: TBR witnessed a decline in sales revenue from $179.37 million in FY20 to $177.57 million in FY21. However, the company registered NPAT of $58.84 million in FY21 relative to $47.35 million in FY20.
• Cash Position: The company sustained FY21 with a cash balance of $4.16 million and total debt of $3.13 million. In Q1FY22, receipts from customers stood at $36.831 million.

Financial Snapshot FY21, Analysis by Kalkine Group

Key Risks and Challenges

The company faces the risk of ongoing COVID-19, gold price and demand changes, depletion of ores and other resource, and exploration risk.

Outlook

TBR remains on track to deliver continued exploration, production, and development activities on its current projects and intends to further acquire appropriate projects for exploration as prospects occur. TBR has completed drilling work at the Japa project and plans to update on the Adiembra resource estimations in the Q2FY22.

Stock Recommendation

The stock of TBR gave a negative return of ~19.197% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $4.60-$6.480. On TTM basis, the stock is trading at a price to book value multiple of 1.0x, lower than the industry (Metals & Mining) median of 2.4x, thus seems undervalued. Considering the current trading levels, improved operational efficiency reflected in NPAT, improved net cash flow from operations, valuation on TTM basis, progressive drilling operations in Ghana & Philippines, and key associated risks with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $4.770, as of 2 December 2021, 10:42 AM (GMT+10), Sydney, Eastern Australia.

TBR Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: 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.

Technical Indicators Defined: - 

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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