OceanaGold Corporation

OGC Details

Production at Haile and Macraes to Increase: OceanaGold Corporation (ASX: OGC) is a multinational gold producer with assets located in the Philippines, the United States and New Zealand. The company recently announced that Nora Scheinkestel resigned from the position of Director, with effect from 19 December 2019.

Quarterly Highlights: During the quarter ended 30 September 2019, the company reported revenue amounting to $134 million, as compared to a revenue of $186 million in the previous quarter. EBITDA for the quarter came in at $34 million, as compared to $71 million in the previous quarter. Both revenue and EBITDA declined on the previous quarter due to nil sales from Didipio, partially offset by a higher price received for gold. Operations at Didipio have been temporarily suspended pursuant to discussions regarding Financial or Technical Assistance Agreement renewal with the Philippine national government. During the quarter, the company received an average gold price of US$1,414, up from US$1,331 in the previous quarter. During the period, the company witnessed significant improvements at Haile and Macraes operations. Gold production at the Haile and Macraes operations stood at 36.8 koz and 37.9 koz, respectively. Production at the Didipio and Waihi operations came in at 16.7 koz and 16.0 koz, respectively. Year-to-date operating cash flow came in at $157.6 million, with immediately available liquidity of $105.6 million and cash in hand of $55.6 million.


Financial Highlights (Source: Company Reports)
 
Outlook: In Q4 2019, the company expects improved production from the Haile and Macraes operations. Production at the Waihi operations is expected to be in-line with Q3.With respect to the Haile operations, the Horseshoe UG permit is expected to be received in Q1 2020, with development to commence in Q3 2020. At the Waihi operations, the company expects a transition to production at Martha UG in 2021.

Valuation Methodology:Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters), *1 USD=1.45 AUD

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of the company gave negative returns of 3.21% over a period of 1 month and is currently trading on the lower band of its 52-weeks trading range of $2.490 - $5.000. The company has a significant organic growth pipeline that is backed by strong exploration results at Haile, Martha Underground at Waihi and Macraes Golden Point. In addition to an expected increase in Q4 production at Haile and Macraes, the company also received approval from the New Zealand Overseas Investment Office to acquire a rural land for expansion at Waihi. Considering the above factors, we have valued the stock using Price to Earnings based relative valuation method and for the purpose, have taken the peer group - Northern Star Resources Ltd (ASX: NST), Evolution Mining Ltd (ASX: EVN) and St Barbara Ltd (ASX: SBM). We have arrived at a target price with lower double-digit upside (in % terms). Hence, we give a “Buy” recommendation on the stock at the current market price of $2.790, up 2.952% on 15 January 2020.

 
OGC Daily Price Chart (Source: Thomson Reuters)
 

Tribune Resources Limited

TBR Details

TBR Initiates Legal Proceedings against Northern Star Resources Limited:Tribune Resources Limited (ASX: TBR) is primarily engaged in the exploration, development and production at the East Kundana Joint Venture (EKJV) tenements. The company has recently commenced proceedings against related corporate entities of Northern Star Resources Limited in relation to the EKJV agreement. In response to the proceedings initiated, Northern Star claimed them to be immaterial and did not offer any argument in defence.

September Quarter Highlights: During the quarter, the company processed 236,766 tonnes of EKJV ore at the Kanowna Plant. At the Greenfields Mill, the company processed 30,454 tonnes of EKJV ore. During the quarter, Rand and Tribune Bullion Accounts were credited with 25,016 ounces of gold and 3,550 ounces of silver, with Tribune’s share at 75%. During the quarter, the company reported cash flow from operating activities at $2,427,000, cash flow from investing activities at $1,898,000 and cash outflow from financing activities at $1,079,000. Cash and cash equivalents at the end of the quarter stood at $62,405,000. Cash outflows in the coming quarter are expected to be ~$35,400,000.


Estimated Cash Outflows for December Quarter (Source: Company Reports)

Stock Recommendation: The stock of the company gave negative return of 7.63% over a period of one month. Currently, the stock is trading below the average of its 52-week high and low of $8.800 and $3.661, respectively. The stock is available at a price to earnings multiple of 8.360x on TTM basis. In July 2019, the company received approval for Mining Lease for the Japa Project in Ghana, that provides it exclusive gold mine rights over the delineated area for 11 years. Considering the company’s cash position, recent business developments and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $5.140, down 5.688% on 15 January 2020.

 
TBR Daily Price Chart (Source: Thomson Reuters)

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