Evolution Mining Limited

EVN Details

Grant of Board Approval for Surface Decline: Evolution Mining Limited (ASX: EVN) is engaged in the exploration, mine development, and sale of gold & copper concentrate. The market capitalisation of the company as on 15 March 2021 stood at ~$6.74 billion. As per a recent update, the company has announced that it has received board approval to progress on the development of a surface decline at the Red Lake gold mine in Ontario, Canada. This will provide an opportunity for the company to access additional low-cost ounces in the high-grade Upper Campbell mine.

Mineral & Ore Reserves Statement as on 31 December 2020: The Group saw an increase in its mineral resources by ~74% to 26.4 million ounces, compared to the previous corresponding period. It also reported a ~49% increase in its ore reserves to 9.9 million ounces during the same period. The ore reserves are estimated based on a conservative gold price of $1,450 per ounce.

H1FY21 Results Update: The company reported decent financial performance during the period with a ~57% increase in underlying profit after tax to $234 million on the pcp. The revenue grew by ~9%, owing to higher metal prices. The EBITDA margin improved to 52% during the period. It has declared an interim dividend of 7 cents per share during the period.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company has given a gold production guidance of 670,000-730,000 oz for FY21, with all-in sustaining cost to be around 1,240-1,300 ($/oz). It is expecting sustained capital to be around $112.5-$137.5 million.

Key Risks: The company operates in a sector that is prone to operational risks, including the risk of obtaining necessary licenses and permits. It is also subject to prudent regulatory supervision due to the potential impact of EVN’s business activities on the environment.

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.

Stock Recommendation: In a recent update, the company has entered into a definitive agreement with Battle North Gold Corporation, where EVN will acquire all of the issued and outstanding shares of Battle North at a price of $2.65 per common share. As per ASX, the stock of EVN is trading below its average 52-weeks’ levels of $3.285-$6.585. The stock of EVN gave a positive return of ~6.86% in the past one year and a positive return of ~3.31% in the past one week. On a technical analysis front, the stock of EVN has a support level of ~$3.777 and a resistance level of ~$4.431. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at a slight premium to its peer average P/E (NTM trading multiple), considering the decent financial performance and optimistic guidance. For the purpose, we have taken peers such as Newcrest Mining Limited (ASX: NCM), OZ Minerals Limited (ASX: OZL), Resolute Mining Limited (ASX: RSG) to name a few. Considering the current trading levels, indicative upside in valuation, decent financial performance in H1FY21 and encouraging outlook, we recommend a ‘Buy’ rating on the stock at the current market price of $4.050, up by 2.531% as on March 15, 2021.

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

Navarre Minerals Limited

NML Details

Positive Assay Results from Stawell Project: Navarre Minerals Limited (ASX: NML) is engaged in the exploration of minerals in Victoria, Australia. The market capitalisation of the company as on 15 March 2021 stood at ~$84.56 million. As per a recent update, the company has reported further high-grade gold assay results, with assays of up to 55.7 grams per tonne of gold from diamond core drilling on its Stawell Corridor Gold Project.

H1FY21 Performance Update: The company reported an interest income of $41,807 during the period, compared to an income of $59,139 in the previous corresponding period. Net loss for the period widened to $980,086 from a loss of $624,648 in the same period under consideration.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company’s recent diamond core drilling program at the Resolution project continues to deliver decent intersections of gold mineralisation. It is confident to deliver its maiden mineral resource in the near future from its 100% owned Stawell Corridor Gold Project. NML is planning to continue diamond drilling beyond the mineral resource estimation period and look to expand the resource base with infill and step-out drilling on both the Resolution and Adventure prospects.

Stock Recommendation:  On 16 February 2021, the company has entered into a binding agreement with Resource Base Limited for the sale of its Black Range base metal exploration tenement in Western Victoria. As per ASX, the stock of NML is trading below its average 52-weeks’ levels of $0.050-$0.295. The stock of NML gave a positive return of ~24% in the past six months and a positive return of ~131.34% in the past one year. On a technical analysis front, the stock of NML has a support level of ~$0.14 and a resistance level of ~$0.166. On a TTM basis, the stock of NML is trading at a P/BV multiple of 4.1x, higher than the industry median (Metals & Mining) of 2.9x. Considering the positive assay results but widening of losses and absence of revenue visibility in the near-term, we are of the view that most of the positive factors have been discounted at current trading levels. Hence, we suggest investors to wait for a better entry-level and give an ‘Expensive’ rating on the stock at the current market price of $0.155 as on March 15, 2021.

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

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.