St Barbara Limited

SBM Details

Higher Production with Increased Efficiency in Focus: St Barbara Limited (ASX: SBM) is an Australia-based gold mining company. The Gwalia mine, part of Lenora operations, is located in south of the town of Leonora, Western Australia. St Barbara's (SBM) ambition is to take their production from approximately 380,000 ounces in FY20 to greater than 500,000 ounces by FY25. 

Q2FY21 Update: The gold production for Q2FY21 was 89,670 ounces from 72,990 ounces in Q1FY21. All-in sustaining costs declined to A$1,517 per ounce in Q2FY21 from A$1,711 per ounce in Q1FY21. In 2QFY21, operational cash contribution stood at A$83 million, up from A$27 million, reported in the year-ago period. 

Consolidated Production (Source: Company Reports)

Outlook: The company aims to hit full rate of production for 370koz to 410koz of gold a year for FY21 at an all-in sustaining cost (AISC) of $1360-$1510/oz (lesser than SMB’s average cost of production). SBM has plans to increase its operational efficiency through keeping its variable costs under check by delivering A$80mn to A$120mn of cash contribution by FY23.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: SBM’s stock price went down by ~7.6% in the past one month. Currently, the stock is trading below the average of its 52-week high and low level of $3.98 and $1.615, respectively. On a technical front, the stock of SBM has a support level of ~ $2.015 and a resistance level of ~$2.57. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have taken peers such as OceanaGold Corp (ASX: OGC), Evolution Mining Ltd (ASX: EVN) and Resolute Mining Ltd (ASX: RSG), to name few. Thus, considering the company’s diversified gold production, decent long-term outlook, and current trading level, we give a “Buy” recommendation on the stock at the current market price of $2.18 per share, down by 3.965% on 28 January 2021.

SBM Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Oceania Gold Corporation

OGC Details

Extending Reach Through Permissions for Mining: Oceania Gold Corporation (ASX: OGC) is a Canada based gold mining company with portfolio across various regions such as Philippines, USA, New Zealand. The Company has got a permission for Golden Point Underground Mine (GPUG) Deepdell North Stage III and the frasers west expansion. These projects will enhance the production capacity through extending the mine life of Macraes operation till 2028. These projects are expected to produce 1.1 mn oz of gold over an 8-year mine life.

Preliminary FY20 Key Results: The company has achieved a gold production of 301,675 ounces for the consolidated FY20 including 99,155 ounces produced in fourth quarter with All-in Sustained Costs (AISC) of $1,276 per ounce sold and cash costs of $866 per ounce sold. The measured and indicated resources are indicating a growth of 0.80 Moz y-o-y due to upgrades from its mining resources. The company has announced intersection of high-grade gold and silver at WKP prospect in New Zealand. The company is maintaining the production of gold by keeping its AISC costs under check. The company has recently got permission to explore gold for various project sites which will certainly enhance the production capacity from those projects. 

Key Results (Source: Company Reports)

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The stock of OGC went down by ~7.3% in the past one month. Currently, the stock is trading below the average of its 52-week high and low level of $4.290 and $1.455, respectively. On a technical front, the stock of OGC has a support level of ~ $2.066 and a resistance level of ~$2.727. The Company will host its FY21 Investor Day and 2020 Full Year Results on February 18, 2021. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have taken peers such as St Barbara Ltd. (ASX: SBM), Evolution Mining Ltd (ASX: EVN) and Resolute Mining Ltd (ASX: RSG), to name few. Thus, considering the company’s decent FY20 performance, extending reach via permissions for mining and current trading level, we give a “Buy” recommendation on the stock at the current market price of $2.28 per share, down by 3.39% on 28 January 2021.

OGC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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