SSR Mining Inc.

SSR Details

Production Guidance Achieved for FY20: SSR Mining Inc. (ASX: SSR) is engaged in the mining and exploration of gold with operations and assets across USA, Turkey, Canada, and South America. As on 27^th January 2021, the market capitalisation of the company stood at ~$4.99 billion. The company produced 711k ounces of gold from all its 4 operating sites and met production guidance for FY20. During September 2020, SSR acquired Alacer Gold Corporation (AGC) pursuant to an Arrangement Agreement and purchased all its shares. With this acquisition, AGC became a 100% subsidiary of SSR Mining Limited. The company ended Q4FY20 with an output of 220k ounces of gold.

Q3FY20 Result Highlights: During September 2020 quarter, the company earned a revenue of US$225k and a gross margin of 37%, higher than Q3FY19. Its net income to the shareholders stood higher at US$25k on pcp basis for the III quarter. It produced 88k ounces of gold at a lower AISC of US$1,034 per ounce of gold and higher average realised gold price US$1,914 per ounce for September 2020 quarter. The company had cash balance of US$733k as on 30 September 2020. Post the quarter, the company announced initiating a cash dividend of US$0.05 per share quarterly starting Q1FY21 and will periodically contemplate to distribute excess of free cash flow by way of share buyback programs and/or incremental dividends.

Financial & Operating Summary, YTD20 vs YTD19 (Source: Company Reports)

Outlook: For FY21, the company has provided production guidance of 720k-800koz gold at an all-in sustaining cost (AISC) of $1,050-1,100 per ounce. It expects free cash flow generation to be approx. 75% weighted to the 2H21 due to capital expenditures timed across all sites and host of other factors. The total exploration and resource development expenditure is estimated at $65 million, of which $54 million represents discretionary spend for near-mine brownfield opportunities across the portfolio.

Stock Recommendation: The stock of SSR gave a negative return of 15.45% in the past three months and negative return of 13.12% in the past one month. The stock is currently inclined towards its 52-weeks’ low level of $21.61. The stock of SSR has a support level of ~$22.03 and a resistance level of ~$23.88.   Considering the current trading levels, decent results of FY20 and aforesaid outlook for FY21, associated risks of the pandemic and valuation, we give a ‘Buy’ rating on the stock at the current market price of $22.370, down by 1.671% on 27^th January 2021.

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

Resolute Mining Limited

RSG Details

Update on Tabakoroni Mineral Resource: Resolute Mining Limited (ASX: RSG) is engaged in the mining and exploration of gold and minerals operating at Syama and Mako mines. As on 27^th January 2021, the market capitalisation of the company stood at ~$772.72 million. The company announced that it will host and discuss quarterly activities for December 2020 quarter on 28^th January 2021. In a recent news, the company announced exploration of mineral resource estimate of 8.1 million tonnes for 1.26 million oz of gold results from Tabakoroni underground. It confirmed potential for further drilling based on the above results and will drill a new mine in Mali at Syama. The company’s gold production for December 2020 quarter stood at 89,888 ounces. RSG poured 395k oz of gold for FY20.

Sneak-Peak at September 2020 Results: During September 2020 quarter, the company reported a reduction of 19% in the production of gold to 87,303 ounces on pcp basis. It realised gold price for gold at US$1,694/oz and AISC of US$1,284/oz for Q3FY20. The company had net debt of US$234 million and held cash and bullion of US$106 million as on 30 September 2020. The cash reserve balance was US$85.8 million at the end of September 2020.

Cost & Production Per Unit Summary (Source: Company Reports)

1H20 Results: The company recorded an increase of 33% YoY in revenue from ordinary activities to US$305.2 million for 1H20. Its PAT attributable to investors rose by 36% US$34.24 million for 1H20 on pcp basis. The company produced 217k ounces and sold 212k ounces of gold for 1H20 at an AISC of US$1,020/oz.

Outlook: For CY21, the production is forecasted at 115-120oz at AISC ranging US$1,175-$1,225/oz and sustaining capital expenditure is estimated at US$49m. The company will focus on extension and classification of oxide satellite operations at Syama and extension of Mako’s mine life.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of RSG gave a negative return of 13.85% in the past three months and negative return of 47.03% in the past one month. The stock is currently inclined towards its 52-weeks’ low level of $0.605. The stock of RSG has a support level of ~$0.659 and a resistance level of ~$0.884. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Westgold Resources Limited (ASX: WGX), Dacian Gold Limited (ASX: DCN), Sandfire Resources Limited (ASX: SFR). Considering the current trading levels, decent cash and bullion position, decent performance in FY20, outlook for FY21, associated risks of the pandemic and valuation, we give a ‘Buy’ rating on the stock at the current market price of $0.715, up by 2.142% on 27^th January 2021.

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

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