Stocks’ Detail

Resolute Mining Limited

Cash and Bullion position at the end of June Quarter stood at decent position of $56 Mn: Resolute Mining Limited (ASX: RSG) is involved in Gold mining, development of the Shyama Underground Mine and exploration for minerals. The company recently, reduced its stake in Mako Gold Limited from voting power 19.45% to 17.0%, effective from August 13, 2019.

FY18 Key Highlights: The company generated a revenue of $223 Mn from gold sales of 128,275 ounces at an average realised price of $1,734 per oz, which was close to the average gold spot price over the period at $1,690 per oz. The gross profit from operations was reported at $24 Mn after depreciation and amortization (related to gold sales) of $10 Mn. RSG reported a net loss after tax of $5 Mn, which was inclusive of an adverse movement in the valuation of net realisable inventory of $29 Mn, offset by $15.5 Mn of unrealised foreign exchange gain on intercompany loans.

Key Highlights of June ’19 Quarter: The company’s 12-months gold production was reported at 305,436 oz, which exceeded the guidance of 300,000 oz. The All-In Sustaining costs for the 12-months period was reported at US$924 per oz, which was lower than the guidance of US$960 per oz. Gold production for the June quarter stood at 78,132 oz at an AISC of US$939 per oz. The cash, bullion and listed investments as on June 30, 2019 was reported at $56 Mn.


RSG’s Cash and Bullion Balance Data (Source: Company Reports)

What to expect: Earlier, FY19 production guidance for the company was estimated at 330,000 oz at All-In Sustaining cost of US$990/oz. As per the release, the new annualised FY19 production guidance for the company has been estimated at 490 koz at All-In Sustaining cost of US$920 per oz.

Stock Recommendation: RSG’s share generated positive YTD return of 39.30.The gold production for 12 months to June 30, 2019, exceeded the production guidance. All-In Sustaining Costs (ASIC) for 12 months to June 30, 2019 was reported lower than the ASIC guidance.

Lately, we have covered the stock with Buy recommendation at the price of $1.675 in the presence of decent business prospects over the long-term. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $1.760, up 10.031% on August 26, 2019 on account of rising gold price.  
 

Saracen Mineral Holdings Limited

FY19 NPAT increased by 22% to $92.5 Mn over previous year: Saracen Mineral Holdings Limited (ASX: SAR) is involved in the gold mining, processing, and sales and mineral exploration. In another update,Mitsubishi UFJ Financial Group, Inc. became a substantial holder in the company by acquiring stake of 5.01%, effective from August 14, 2019.

The company recently published its full year financial report for FY19, wherein it highlighted that its revenue increased by 9% to $555.6 Mn, as compared to $511.0 Mn in FY18. EBITDA increased by 11% to a record of $219.5 Mn, as compared to $198.7 Mn in FY18. NPAT increased by 22% to a record $92.5 Mn, as compared to $75.6 Mn in FY18, whereas the underlying NPAT increased by 40% to $94.2 Mn, as compared to $67.3 Mn in FY18. The Gold production increased by 12% to a record of 355,077 oz with All-In Sustaining Costs of $1,030/oz, as compared to 316,453 oz with All-In Sustaining Costs of $1,139/oz in FY18. The cash and cash equivalents on June 30, 2019 was reported at $154.4 Mn after spending $216.9 Mn on exploration and growth with no debt, as compared to $118.3 Mn as on June 30, 2018. The Board of Directors declared an inaugural dividend policy targeting a payout equal to 20-40% of NPAT, subject to minimum cash balance requirement of $150 Mn, effective from FY2020. 
 

FY19 Key Financial Metrics (Source: Company Reports)

What to expect: As per the release, FY20 production guidance at Carosue Dam Operations (CDO) has been estimated at 190,000 to 200,000 ozs.SAR’s primary business plan for CDO over the next 2 years is to develop the operation to achieve a long-term sustained production rate of 240,000 - 250,0000oz per annum.

FY20 production guidance at Thunderbox Operations (TBO) has been estimated at 160,000 to 170,000 ozs.

Stock Recommendation: SAR’s share generated positive YTD return of 19.24%. Its EBITDA margin and net margin for FY19 stood at 39.7% and 16.6%, higher than the industry median of 30.9% and 15.6%, respectively, implying decent fundamentals for the company. ROE for FY19 stood at 21.2%, better than the industry median of 12.2%, which implies that the company generated better returns for its shareholders than its peer group. Currently, the stock is priced slightly towards its 52-week high level of $4.750 with PE multiple of 30.71x. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $3.800, up 9.51% on August 26, 2019 on account of rising gold price. 
 

Evolution Mining Limited

Bank Debt Reduced from $395 Mn in FY18 to $300 Mn in FY19: Evolution Mining Limited (ASX: EVN) is involved in exploration, mine development, mine operations and the sale of gold and gold/copper concentrate in Australia. The company recently announced a change in directors’ interest where Jacob Klein and Lawrie Conway, acquired 684,854 shares and 269,943 shares, respectively, effective from 21 August 2019 and 19 August 2019, respectively.

FY19 Key Highlights: Sales revenue for the period reported a decline of 2% to $1,509.8 million as compared from $1,540.4 million in FY18. For the period, underlying NPAT and Statutory NPAT, both were reported at $218.2 million as compared to $250.8 million and $263.4 million in FY18. Its cash balance and bank loan at the end of the period were reported at $335.2 million and $300.0 million, respectively, as compared to A$323.2 million and $395.0 million in FY18. The Board of Directors declared fully franked final dividend of 6 cents per share, with record date and payment dates on August 27, 2019 and September 27, 2019, respectively.
 

FY19 Underlying NPAT (Source: Company Reports)

What to expect: Group’s FY20 gold production guidance has been estimated at 725,000 – 775,000 oz, with C1 cash costs and All-in sustaining cost of $610 – $660 per oz and $890 - $940 per oz, respectively.


FY20 Guidance (Source: Company Reports)

Stock Recommendation: EVN’s share generated YTD return of 34.34%. Its EBITDA margin for FY19 stood at 46.7%, higher than the industry median of 30.9%. Its current ratio for FY19 stood at 2.31x, better than the industry median of 1.71x, which implies that the company is in a better position to address its short-term obligations. Its debt to equity for FY19 stood at 0.12x, lower than the industry median of 0.13x, indicating that the company is less leveraged than its peer group. Hence, considering the aforesaid facts, outlook and current trading level, we recommend a “Hold” rating on the stock at the current market price of $5.330, up 8.998% on August 26, 2019 on account of rising gold price.
 

St Barbara Limited

Statutory NPAT decreased by 36.56% in FY19: St Barbara Limited (ASX: SBM) is involved in the mining and the sale of gold, mineral exploration and development. The company recently announced a change in directors’ interest wherein Mr Robert Scott Vassie acquired 64,914 fully paid ordinary shares by vesting 64,914 unlisted employee rights, taking the final holdings to 1,933,967 fully paid ordinary shares and 351,095 unlisted employee rights, effective from August 21, 2019.

FY19 Key Highlights: The statutory net profit after tax for the period was reported at $144 million as compared to $227 million in FY18. Underlying net profit after tax for the period was reported at $142 million as compared to $202 million in FY18. The company reported record annual production from Simberi mine at 142,177 ounces as compared to 134,661 ounces in FY18. The consolidated All?In Sustaining Cost for the period was reported at $1,080 per ounce as compared to $891 per ounce in FY18. Its total cash at bank and term deposits at the end of the period was reported at $110 million. The Board of Directors declared fully franked final dividend of 4 cents per share, with record date and payment date on September 4, 2019 and September 25, 2019, respectively.


FY19 Cash Flow Data (Source: Company Reports)

What to expect: As per the release, the consolidated FY20 production guidance has been estimated at 310 to 335 koz @ AISC A$1,250 to A$1,350/oz, where FY20 production guidance for Gwalia has been estimated at 200 to 210 koz @ AISC A$1,230 to A$1,290/oz and FY20 production guidance for Simberi has been estimated at 110 to 125 koz @ AISC A$1,285 to A$1,450/oz. The production guidance for FY20 for Atlantic Gold will be released to the market in Q1 September FY20 quarterly report.

Stock Recommendation: SBM’s share generated positive YTD return of -29.31%. Its gross margin, EBITDA margin and net margin for FY19 stood at 51.5%, 44.3% and 21.8%, better than the industry median of 42.7%, 30.9% and 15.6%, respectively. Its current ratio for FY19 stood at 10.07x, better than the industry median of 1.71x. However, it is presently trading below the average of 52 weeks high and low levels of $5.152 and $2.480, respectively.

The financial year 2019 saw a decline in bottom-line along with lower production from Gwalia compared to the prior year, partially offset by record production from Simberi. The year 2019 was also highlighted by the acquisition of Atlantic Gold which was completed 19 July 2019. Given the backdrop of FY19 performance and current trading levels, we have a watch stance on the stock at the current market price of $3.410 (up 6.897% on August 26, 2019 on account of rising gold price), and suggest that investors should wait for few more catalysts that may drive the stock.


Comparative Daily Chart (Source: Thomson Reuters) 

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