Alacer Gold Corp

AQG Details
 
Annual Production Within the Guidance Range:Alacer Gold Corp (ASX: AQG) is engaged in the production and exploration of gold. The market capitalisation of the company stood at $1.96 billion as on 5^th February 2020. The company recently updated the market with the operational and financial performance for the full-year 2019, wherein the gold production for the year stood at 391,213 ounces out of which 157,646 ounces produced from the oxide plant and 233,567 ounces produced from the sulfide plant. The total gold production was within the guidance range of 380,000 oz – 430,000 oz. The company’s full year consolidated All-In Sustaining Costs stood at $713.

For 2019, the total gold sales stood at 395,046 ounces with sales proceeds amounting to $552.5 million. The company experienced cash flow from operating activities of $255.2 million. However, these cash flows exclude the ounces sold which were produced prior to the declaration of commercial production of the sulfide plant. The company’s strong performance resulted in net debt to 2019 EBITDA of 0.2x
Operating Performance (Source: Company Reports)

Guidance for FY20:The company anticipates consolidated production in 1H FY20 to be lower because of the continued ramp-up of the sulfide plant and timing of scheduled shutdowns for the autoclaves. For FY20, the company has increased exploration spend to $20 million out of which $14 million is attributable to Alacer.

Valuation Methodology: P/CF-Based Multiple Approach

P/CF-Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: Net margin of the company stood at 33.5% in FY19 as compared to the industry median of 5.0%. This reflects that the company possesses decent capabilities to convert its top-line into the bottom-line as compared to the broader industry. Return on equity of the company stood at 14.5% in FY19 against the industry median of 3.7%, demonstrating the company’s decent returns provided to shareholders. We have valued the stock using P/CF- based relative valuation method and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Thus, considering the company’s capabilities to convert its top-line into the bottom-line, strong operational performance and value to shareholders, we give a “Buy” recommendation on the stock at the current market price of $6.490 per share, down by 1.368% on 5^th February 2020. The fall in the stock price could be due to the release of full year 2019 results.
 
 
AQG Daily Technical Chart (Source: Thomson Reuters)
 

Resolute Mining Limited

RSG Details

Equity Raising of $196 Million:Resolute Mining Limited (ASX: RSG) is involved in gold mining. The company is also in the development of resource projects as well as prospecting and exploration for minerals. The market capitalisation of ~$1.14 billion as on 5^th February 2020. The company recently announced that Van Eck Associates Corporation and its associates has made a change to their substantial holdings in the company on 29^th January 2020 with current voting power currently standing at 9.31%. The company recently announced an equity raising amounting to $196 million. This comprises placement of new fully paid ordinary shares in order to raise $171 million and a share purchase plan of $25 million. The company would be using proceeds from equity raising to make payment of US$130 million acquisition finance facility and for general working capital purposes. 

The company has also inked definitive transaction document for divesting its Ravenswood Gold Mine for the consideration of $300 million. The company is expecting completion of the sale in March 2020 quarter. This transaction would be value creative for its shareholders. The company would be utilising the proceeds for decreasing debt and further strengthen its balance sheet. The below picture depicts an overview of Pro-forma position:


Pro-Forma Position (Source: Company Reports)

Gold production for FY20:The company is expecting gold production for FY20 of 500,000oz at an AISC (All-in-Sustained Cost) of US$980/oz. With respect to Syama, RSG is anticipating gold production of 260,000oz at an AISC of US$960/oz. Production from Syama sulphide is anticipated to accelerate in the March 2020 Quarter and will be a strong performer for Resolute in FY20.

Valuation Methodology: EV/EBITDA Based Valuation

EV/EBITDA Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation:As at 31^st December 2019, the Cash, bullion and listed investments of the company stood at US$127 million. The company’s strong operating cashflows, as well as reduced capital demands would underpin a stronger balance sheet and create further opportunities for the growth and ambition of the company. We have valued the stock using EV to EBITDA based relative valuation method and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). In the light of the company’s recent plan of equity raising and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$1.050 per share, down by 4.545% on 5^th February 2020.

 
RSG Daily Technical Chart (Source: Thomson Reuters)

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