AngloGold Ashanti Limited

AGG Details

Restoration of Underground Mining at Obuasi: AngloGold Ashanti Limited (ASX: AGG) is a producer and explorer of gold and a diversified portfolio and operations globally. AGG recently informed that it is planning to restore the underground ore mining at the Obuasi Gold Mine in Ghana by mid-October 2021.

• AGG will use the underground ore to restore the unprocessed raw stockpile for the remainder of FY21.
• AGG plans to restart the gold production from the underground ore sources in January 2022 and expects to achieve the full mining rate (~4,000 tons per day) in 1HFY22.

CTO Appointment: Mr Marcelo Godoy will effectively join AGG as the Chief Technology Officer effectively from 1 November 2021.

1HFY21 Highlights:

• Lower Production: The production for 1HFY21 stood at 1.2Moz at a higher cash cost of US$1,003/oz versus 1.323Moz produced in 1HFY20 at US$770/oz. The 1HFY21 output was affected by COVID-19, lower realised grades from specific operations, suspension of underground mining at Obuasi Gold Mine, and an inward investment programme in Brazil to extend the mine life.
• Higher Output at Siguiri: AGG produced 117,000oz gold, up by 19% YoY in 1HFY21 compared to 98,000oz in 1HFY20 due to improved grades and plant recoveries.
• Reduced Adjusted Net Debt: The adjusted net debt declined by 41% YoY to $850 million in 1HFY21. AGG recorded an improved adjusted net debt to adjusted EBITDA ratio of 0.37 times as of 30 June 2021, down from 0.73 times as of 30 June 2020.
• Liquidity Position: AGG has US$2.5 billion available liquidity, consisting of US$1.1 billion cash and cash equivalents as of 30 June 2021.

Adjusted Net Debt Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces production hurdles, reserves depletion, commodity price changes, and increased regulation on its operations. The COVID-19 impact on the labour movement and higher safety measures also pose an ongoing risk to the company.

Outlook:

• The revised production guidance for FY21 stands at 2.45Moz - 2.60Moz compared to 2.7-2.9Moz stated previously. The updated guidance excludes the production at Obuasi for 2HFY21.
• The revised FY21 AISC stands at US$1,240/oz- US$1,340/oz versus US$1,130/oz - US$1,230/oz affected by lower operational performance, increasing oil prices, and the removal of Obuasi production contribution in the 2HFY21.
• Total Capex is now estimated at US$1,030 - US$1,190 million versus US$990 - US$1,140 million for FY21.
• AGG will consider the impact of Obuasi in FY22’s guidance after the completion of the mine-wide review and ramp-up plan for production.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AGG gave a positive return of ~16.25% in the past three months and a positive return of ~25.04% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $3.950 - $7.830. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/Sales multiple, considering its lower production, net profit in 1HFY21, and revised narrowed down forecast for production for FY21. For the purpose of valuation, few peers like Regis Resources Limited (ASX: RRL), Resolute Mining Limited (ASX: RSG), St Barbara Limited (ASX: SBM), and others have been considered. Considering the low trading levels, expected restoration of mining at the Obuasi project in October 2021 and plans to start production in January 2022, improved production from the Siguiri mine in 1HFY21, acquisition of Corvus’ assets in Nevada and plans of production in the medium-term in North America, valuation, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $4.370 as on 6 October 2021, 10:30 AM, (GMT+10), Sydney, Eastern Australia.

AGG Daily Technical Chart, Data Source: REFINITIV 

Tribune Resources Limited

TBR Details

FY21 Results: Tribune Resources Limited (ASX: TBR) is engaged in the exploration, development, and production of gold. TBR operates Japa Gold Project in Ghana, Diwalwal Gold Project in the Philippines, and holds a 49% stake in the East Kundana Joint Venture tenements (‘EKJV’).

• Decline in Revenue: The company experienced a decline in revenue from $180.41 million in FY20 to $177.70 million in FY21.
• Increase in NPAT: TBR reported $50.74 million higher net profit after tax for FY21 attributable to the owners compared to $47.35 million in FY20.
• Production Share from EKJV Tenements: TBR’s share of fine gold produced increased to 62,726 oz in FY21 versus 42,264 oz in FY20.
• Higher Net Cash from Operating Activities: TBR generated $44.37 million net cash from operating activities during FY21 versus $14.73 million in FY20.
• Liquidity & Debt Position: TBR held $4.16 million cash and cash equivalents and total debt of $3.13 million as of 30 June 2021.
• Ongoing EKJV Litigation: The company awaits the Court’s decision regarding an ongoing legal proceeding against Northern Star Resources Group of Companies (NST). The last legal proceeding against NST was conducted in mid-October 2020 in the Supreme Court.

Total Dividends Declared from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of ongoing COVID-19, gold price and demand changes, depletion of ores and other resources.

Outlook:

• At the Japa Project in Ghana, TBR will continue the drilling campaign through Q1FY22 to complete the diamond drilling component of the Adiembra Resource definition program and continue the reconnaissance program testing conceptual targets within the Mining Lease.
• At the Diwalwal Gold Project, TBR undertook diamond core drilling on the Balite Vien for resource definition. TBR also conducted geological and structural mapping, explored gold anomalies at Lantawan and Rockstar. TBR plans to evaluate these anomalies further by diamond core drilling.
• TBR will conduct the upcoming Annual General Meeting (AGM) on 26 November 2021.

Stock Recommendation: The stock of TBR gave a negative return of ~3.11% in the past month and a negative return of ~5.52% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $4.600 - $7.560. On a TTM basis, the stock of TBR is trading at a price to book value multiple of 1.1x, lower than the industry (Metals & Mining) median of 2.4x, thus seems undervalued. Considering the low trading levels, rise in NPAT and net cash from operating activities in FY21, valuation on a TTM basis, continued drilling at the projects, increase in the share of gold production on EKJV tenements in FY21, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $4.90, as on 6 October 2021, 11:40 AM, (GMT+10), Sydney, Eastern Australia.

TBR Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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