Evolution Mining Limited

Cowal plant expansion & Discovery Success:Evolution Mining Limited (ASX: EVN) is a gold exploration company with operations in Western Australia. The Company owns the gold mines - Cracow, Edna May, Mt Rawdon, and Pajingo - and the Mt Carlton development project. The company has through a recent ASX release announced that the board has given consent to a plant upgrade at the Cowal processing plant so as to increase the production capacity to 8.7 metric tonnes per annum. The works for this expansion will be commencing from the March 2019 and it will be continued for the period for twelve months from then on. This expansion will fetch a cost of $25-30 Mn. This increase in production is anticipated to materialize into additional gold production from the current prevailing capacity of 5koz in FY20, 10-15 koz in FY21 and 20 koz per annum from FY22 onwards. Moreover, this expansion is expected to lead to a cost reduction of 8% - 12% per annum. The deep drilling program at GRE – 46 continues to deliver phenomenally well, resulting into several high-grade intercepts came from the current drill program.

For the quarter ended September 2018, the firm sold 196,021 oz of gold at an average price of A$1662/oz. During the quarter, the company continued to deliver positive cash flows across its operations after fulfilling its OPEX and CAPEX needs. The operating mine cash flows came in at A$ 196.9 Mn for the June 2019 Quarter vis-à-vis $221.9 Mn for the PCP. This fall was mainly due to the timing of gold sales in September quarter and lower realization in copper prices.

The firm has given its guidance regarding the production of 700koz for the upcoming three years. This production would be achieved on the back of capacity contributed by the expansion of Cowal plant. The company is expected to have a Copper production of 20-22 ktpa within a span of the next three years. As the Australian Gold sector seems to be performing really well, hence we expect that the company will continue to deliver the growth shortly.


Production Trend (Source: Company Reports)

Meanwhile, the share price has given substantial returns by rising 14.80% in the past three months as of November 22, 2018. Currently, it has a market capitalization of $5.4 billion. Considering its Cowal plant expansion and expectations of high-grade intercepts from the drill program, we maintain our “Buy” recommendation on the stock at the current market price of $3.130 (down 1.572% on November 2018).
 

OceanaGold Corporation Limited

Strong Cash Flows & performance in line with guidance:OceanaGold Corporation (ASX: OGC) is a gold mining and exploration company. The Company currently owns interests in projects in New Zealand and the Philippines. The company has through a recent ASX release announced that they had surveyed the Waihi site and reviewed its operations. The company gave its AISC (all in sustainable cost) margins for Q3 2018 at $638 per oz sold while the YTD 2018 margins came in at $552 per oz sold, for the site. Also, for the site, the gold production is expected to be 75000-85000 ounces, and AISC is expected to be anywhere in the range of $750-790 per ounce sold. As far as the Macraes site is concerned, it achieved a production of 49,973oz for the quarter which was broadly in line with their earlier estimates also the AISC margins came in at $341 per oz sold for the third quarter of 2018 while the YTD margins were $323 per oz sold. The production is expected to be ranging from 190,000-200,000 ounces while the full year AISC is expected to be $ 950-1000 per ounce sold from the site.

The recent drill results at the Martha project located at Waihi were very encouraging as the company found evidence of high-grade mineralization through its continuous drilling operations which are expected to be at a grade of between 4.0 gram per ton (or g/t) and 6.0 g/t gold.

For the Q3 2018 the revenue came in at $ 187 Mn vis-à-vis $206 Mn for Q2 2018, hence the revenue witnessed a degrowth of 9% Quarter on Quarter. This was on the back of lower average gold prices received.

Also, the EBITDA for the quarter came in at $79 vis-à-vis $ 110 for the Q2 2018, a fall of 28.18% Quarter on Quarter. This fall was on account of the lower market prices and higher cost of goods sold. However, the company had strong cash flows from operations for the quarter in spite of softness in gold prices.


Key Financials Metric Trend (Source: Company Reports)

Meanwhile, the share price has modestly risen by 2.72% in the past three months as at November 22, 2018. Currently, it has a market capitalization of $2.56 billion. Considering the recent financial performance, & expected achievement of its 2018 guidance, we maintain our “Hold” recommendation on the stock at the current market price of $4.18.
 

SARACEN MINERAL HOLDINGS LIMITED

Robust Cash Position:Saracen Mineral Holdings Limited (ASX: SAR) explores for and produces gold. The Company produces gold from its Carosue Dam mine located northeast of Kalgoorlie, Western Australia.

The company has through a recent ASX release announced that the Intermin Resources limited has reached on a pact with the company to divest its holdings in the Lehman’s gold joint venture at a consideration of which is $250,000 Mn in cash on execution & $ 2.25 Mn in cash on completion along with a 2.5% Net Smelter Royalty, which will commence once the company has reached a  capacity of 42,000 ounces of gold and the same will end once the production has reached 100,000 ounces. This divestment will enable the company (SAR) to explore and develop the projects with no load and further strengthen Intermin’s financial position as it has its gold exploration and mine development growth plans.

For the September Quarter, the firm has achieved a phenomenal production of 88,940 Oz of Gold at the ASIC of $993 per Oz. The company’s cash & equivalents for the quarter came in at $131 Mn via-a-vis 118.3 million. This was achieved on account of the strong production performance and the robust volumes achieved by the company. These increased production performance and guidance is perfectly in line with the firm’s budgets and estimates.
 
 
Consistent Cash and Equivalent Build (Source: Company Reports)

Meanwhile, the share price has substantially risen by 35.94% in the past three months as at November 22, 2018. Currently, it has a market capitalization of $2.14 billion. Considering the company’s robust production volume growth & healthy cash position we maintain our “Hold” recommendation on the stock at the current market price of $2.580.
 

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