OceanaGold Corporation

OGC Details

Key Takeaways from Q2FY21 and H1FY21 Results: OceanaGold Corporation (ASX: OGC) is a multinational gold company with a portfolio of established operating assets, including Macraes and Waihi operations in New Zealand; and the Haile Gold Mine in the United States of America.

• Rise in Revenue: For Q2FY21, the company reported revenue of US$182.6 million, up from US$148.9 million in the previous quarter, mainly driven by the higher sale volumes and higher realised gold price.
• Increase in NPAT: For Q2FY21, OGC reported NPAT of US$31.4 million, taking the total H1FY21 NPAT to US$47.4 million, significantly up from the loss of US$57.4 million, reflecting improved margins on higher total sales.
• Decline in Operating Cashflow: Q2FY21 operating cash flow stood at US$35.8 million, down from US$47.6 million in Q1FY21, impacted by the delivery of 31,111 gold ounces from the Q3FY20 presale.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Fluctuations in Gold Prices: OGC is exposed to the risks related to the fluctuations in the gold prices as it could impact its financial results.
• Foreign Currency Risk: The company has operations in different countries, exposing it to foreign currency risk.

Outlook: Looking ahead, the company is focused on advancing Waihi District opportunities. For FY21, the company expects its total gold production to be in the range of 350,000 to 370,000 gold ounces at AISC of $1,200 to $1,250 per gold ounce.

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

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 has provided a return of 8.73% in the last six months and 24.5% in the last nine months. It is currently trading lower than the average 52-week price level band of $1.715 and $3.940. On the technical analysis front, the stock has a support level of ~$2.14 and a resistance of $2.79. We have valued the stock using EV/Sales multiple-based illustrative relative valuation method and have arrived at a target price of a low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peers, considering the increased sale volumes in Q2FY21 and higher realised gold price during H1FY21, and modest production outlook. We have taken peers like Regis Resources Ltd (ASX: RRL), St Barbara Ltd (ASX: SBM), Evolution Mining Ltd (ASX: EVN), etc. Considering the company’s decent operational and financial performance in H1FY21, ongoing focus on Waihi District opportunities, current trading level, and valuation, we give a “Hold” rating on the stock at the current market price of $2.440, down by ~3.938% as on 6 August 2021.

OGC Daily Technical Chart, Data Source: REFINITIV 

Ramelius Resources Limited

RMS Details

Diggers and Dealers Presentation Highlights: Ramelius Resources Limited (ASX: RMS) is an Australian gold production company that owns and operates the Mt Magnet, Edna May, Vivien, Marda, Tampia and Penny gold mines, all of which are located in Western Australia. At the recently held Diggers and Dealers mining conference, the company’s management highlighted several key points about the company.

• RMS has a track record of consistent production growth with expanding margins.
• It has established a Dividend policy to ensure a shareholder return focus.
• In FY22, it is focused on managing costs, improving safety, and assessing strategic acquisition opportunities to deliver step-change.
• RMS is currently progressing on Mt Magnet & Edna May mining/processing studies.

Increase in RMS Mine Plan: The company recently announced that the size of its Mine Plan has been increased 27% to 1.84Moz, following another a record production year in FY21. Average All-in Sustaining Costs (AISC) for the first 7 years is expected to be in the range of A$1,390 - A$1,490/oz.

June 2021 Quarter Highlights: For the June 2021 quarter, the company reported a total production of 61,840 ounces at an AISC of A$1,394/oz, taking the total FY21 production to 272,109 ounces at an AISC of A$1,317/oz. The company ended the June quarter in a net cash position of $234.0 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the change in the prices of gold. Further, it is also exposed to the risks related to the COVID-19 pandemic as it could cause temporary suspension of operations.

Outlook: For FY22, the company expects its total gold production to be in the range of 260,000 - 300,000oz with an AISC of A$1,425 – 1,525/oz. In the first half of FY22, RMS expects its total capital & project development expenditure to be around $50 million.

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

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: Over the last six months, the stock has provided a return of 18.21% and is trading lower than the average 52-week price level band of $1.180 - $2.530, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$1.62 and a resistance of ~$1.90. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of a high single-digit upside (in % terms). We believe the company can trade at a slight premium to its peers, considering its record of consistent production growth, increase in Mine Plan and modest outlook. We have taken peers like Silver Lake Resources Ltd (ASX: SLR), Regis Resources Ltd (ASX: RRL), Evolution Mining Ltd (ASX: EVN), etc. Considering the company’s decent production performance in FY21, ongoing focus on managing costs, robust balance sheet, current trading level, and valuation, we give a “Hold” rating on the stock at the current market price of $1.705, down by ~3.673% as on 6 August 2021.

RMS 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.

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