Evolution Mining Limited

Enjoying cost leadership in terms of AISC:Evolution Mining Limited (ASX: EVN) disclosed that the group, a substantial holder of the Riversgold Ltd, changed its substantial holding from 15.1 per cent of interest to 18.72 per cent of the voting power since December 03, 2018. The consideration which was provided in relation to this change was $0.075 per share for a total of 3,200,000 ordinary shares.

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 September 2019 Quarter vis-à-vis $221.9M for the June 2018 Quarter. This fall in cash flows was on account of the timing of gold sales in September quarter and a lower realization in copper prices.

The firm has given its guidance regarding the production of more than 700koz of gold for all the upcoming three years. This production would be achieved, on account of the capacity contributed by the expansion of Cowal plant. Hence considering the robust trends in the Australian Gold sector & the cost leadership enjoyed by the company in terms of AISC (All in sustainable costs), we expect that the company will keep on delivering growth in the subsequent quarters.


EVN’s Net Mine Cash Flows (Source: Company Reports)
 
On the analysis front, the company has a pre-tax margin of 22% in FY18 against the Industry median of 18.10%, representing the efficiency of the company in converting the revenue to profit. As a result, the company’s ROE came in at 11.9% which is decent enough & at par with the Industry average of 11.7%.Meanwhile, the stock price has risen 23.43% in the past three months as on 21 December 2018 and is currently trading at reasonable PE level of 22.67x. Hence considering cost leadership in terms of AISC and robust pre-tax margins, we reiterate our “Buy” recommendation on the stock at the current market price of $3.550.
 

Resolute Mining Limited

Syama Underground Mine development- catalyst towards an enhanced production: Resolute Mining Limited (ASX: RSG) has via a recent release stated that it has forward sold an additional 30,000 ounces of gold at an average price of A$1,783 per ounce. This will be in line with a scheduled monthly delivery of 5,000 ounces between July 2019 and December 2019. The objective of the Company’s Australian dollar hedging is to protect projected returns from the Ravenswood Gold Mine in Queensland which’s into the development stage. This will help the company in actively manage the gold sales and take advantage of the gold price volatility and maximize revenues.
For the quarter ended September 2018, the firm achieved a gold production of 56k oz at an AISC of A$1560/oz and sold 61k oz of gold at an average realized price of A$1727/oz. The production and cost performance for the quarter was dismal. This was due to the scheduled biennial roaster shutdown at Syama. Roaster maintenance was successfully completed over a 7-week period during the Quarter, which resulted in significantly lower production from the Syama. Moreover, Syama experienced significantly higher than average rainfall during the Quarter. This also presented challenges from a material handling perspective, which led to lower production.
The firm has given its production guidance of more than 300koz of gold for the FY 2019 at A$1,280/oz. This production would be achieved, on account of the capacity contributed by the Syama Underground Mine development which is progressing as per the earlier stated timeline and budget.

RSG’s Production Outlook (Source: Company Reports)

On the financial metrics front, the company has been consistently posting higher net margin with the latest one coming at 17.5% compared to the industry median of 12.5%. The company has managed decent ROE with the current being 9.5% against the industry average of 11.7%.RSG has sufficient liquidity as indicated by the current ratio of 2.31x against the Industry average of 1.73x with virtual debt-free status, representing a decent balance sheet of the company. In the meantime, the stock price has fallen over the past six months by 7.54% as on 21 December 2018. Hence considering the enhanced production outlook that will help leverage the opex and the robust net margins, we reiterate our “Buy” recommendation on the stock at the current market price of $1.165.
 

OceanaGold Corporation Limited

Regulatory overhang on the stock over for now: OceanaGold Corporation (ASX: OGC) has through a recent ASX release announced that an independent panel of commissioners appointed by the Regulator has granted all resource consents for the Martha underground mine and resumption of mining operations from the stage four of the open pit. This will provide certainty to all the stakeholders, that the mining at Waihi will continue for at least the next ten years. The parties which had earlier provided the submissions, now have time till 1 February 2019, to appeal against the decision. For the third quarter of 2018, the firm achieved a gold production of 138,034 oz at an AISC of A$761/oz and sold 134,134k oz of gold at an average realized price of A$1202/oz. Additionally, for Q3FY18, the revenue came in at $ 187 Mn vis-à-vis $206 Mn for Q2 2018, exhibiting degrowth of 9.2% on Q0o-Q basis. This was on the back of lower average gold prices received. Resultantly, EBITDA for the quarter came in at $79 vis-à-vis $ 110 for the Q2 2018, a fall of 28.18% on a QoQ basis. 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 despite softness in gold prices.


OGC’s Financial Highlights (Source: Company Reports)
 
Meanwhile, the share price has risen 21.55% in the past six months as at 21 December 2018 and is trading towards a higher level. Hence, considering that the company has got the requisite approval from the regulators for the resumption of mining and expected decent cash flow in the upcoming period despite lower gold price received, we maintain our “Hold” recommendation on the stock at the current market price of $4.580 (up 4.091% on December 24, 2018).
 

Saracen Mineral Holdings Limited

Decent Outlook:Saracen Mineral Holdings Limited (ASX: SAR) has via a release stated that they have had two discoveries in the Carouse Dam corridor within the 4km of the 2.4Mtpa mill. These are: Atbara discovery hole of 40 metres @ 3.80g/t, and Qena discovery hole of 20.0 metres at 2.80g/t. These new discoveries were expected to result in the increased production up to 4,00,000 ozpa. The follow up drilling at both the discoveries had already started. This growth will lead to increased inventory underpinned by the increase in production and leading ultimately to higher operating cash flows.

For the September Quarter, the firm has achieved a phenomenal production of 88,940 Oz of Gold at the AISC of $993 per Oz. The company’s cash & equivalents for the quarter came in at $131 Mn vis-a-vis 118.3 million. This was achieved on account of the strong production performance and the robust volumes achieved by the company. This increased production performance and guidance is complete as per the firm’s budgets and estimates.

The company has guided for production of 325-345 koz at the all-in sustainable cost (AISC) of $ 1,050-1,100 per Oz for the FY 2019. This guidance is on the back of robust production expectations from the Carouse dam corridor.


SAR’s Group Production & AISC (Source: Company Reports)

From the analysis standpoint, the company has a pre-tax margin of 22.10% in FY18 which is better than the Industrial median of 19.0%, which depicts that it is a growth stock. For FY18, the net margin came in at 14.8% compared to the industry average of 12.5%. Over the period, the company has also generated a significant return for the shareholders with ROE at 22.4% against the industry average of 11.7%. Meanwhile, the share price has risen 24% in the past six months as at December 21, 2018 and is trading at higher PE multiple of 30.03x. By looking at its decent outlook underpin by proper production growth in FY19, we maintain our “Hold” recommendation on the stock at the current market price of $2.770.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.