Stocks’ Details 

Perseus Mining Limited

September Quarter Highlights: Perseus Mining Limited (ASX: PRU) is a metal and mining company, primarily involved in gold production, mineral exploration and gold project development in the Republic of Côte d’Ivoire and Republic of Ghana, both located in West Africa. As on 30 October 2020, the company’s market capitalisation stood at ~$1.51 billion. During the September quarter, the company’s two operating gold mines, namely Edikan in Ghana and Sissingué in Côte d’Ivoire, performed decently and produced a combined total of 68,772 ounces of gold, up 6% on the prior quarter. Over the quarter, the company sold 60,441 ounces of gold at an average sales price of US$1,595/ounce. During the quarter, the company made significant progress in the development of its Yaouré Gold Project in Côte d’Ivoire. At the end of September quarter, the company had cash and bullion of US$147.4 million, down by US$16.2 million on the previous quarter.

September Quarter Performance (Source: Company Reports)

FY20 Performance Highlights: For the year ended 30 June 2020, PRU reported total gold production of 257,639 ounces at AISC US$972 per ounce. The company’s total gold sales stood at 272 778 ounces at a weighted average sale price of US$1,457 per ounce, resulting in a cash margin of US$485 per ounce. The company reported total EBITDA of A$273.8 million, up 67% on the previous year, reflecting PRU’s long term strategy in action. Further, net cash flows from operations stood at A$212.8 million in FY20, up 41% on the previous year.

FY20 Results (Source: Company Reports)

Acquisition of Bagoé Gold Project: On 29 September 2020, the company announced that it has completed the implementation of the Scheme of Arrangement with Exore Resources Limited. As a result of this, it has acquired all of Exore’s assets including a portfolio of exploration properties situated in northern Côte d’Ivoire. The company is now planning to undertake a Definitive Feasibility Study (DFS) to confirm the technical and financial viability of a development concept for Bagoé.

Outlook: Looking ahead, the company expects the Edikan and Sissingué gold mines to produce strongly in the December 2020 quarter. The company expects Yaouré Gold project to contribute to the overall group’s production performance in the December quarter for the first time. For the first half of FY21, the company expects its total gold production to be in the range of 139,000-125,500 ounces with average AISC to be between US$940/oz - US$1,025/oz.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock of PRU has corrected by 20.84% and is trading higher than the average 52-weeks price level band. On the technical analysis front, the stock has a support level of ~A$1.12 and a resistance of ~A$1.56. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). For the purpose, we have taken peers like St Barbara Ltd (ASX: SBM), Regis Resources Ltd (ASX: RRL), Resolute Mining Ltd (ASX: RSG), etc. The company’s FY20 current ratio stood at 3.30x, higher than the industry median of 1.69x, demonstrating that the company is well-equipped to pay its short-term obligations. Considering the company’s improved financial performance in FY20, increased production in September 2020 quarter, decent liquidity position and outlook, we give a “Buy” recommendation for the stock at the current market price of A$1.215, down by 2.017% on 30 October 2020.

De Grey Mining Limited

New gold Zones Identified at Crow:  De Grey Mining Limited (ASX: DEG) is a Western Australia-based mining company, mainly focused on the exploration and development of its 100% owned Mallina Gold Project (MGP). At MGP, the company has made a large scale, high value, near-surface gold discovery at an area called Hemi. On 29 October 2020, the company announced that it has identified new gold zones in extensional drilling in the north-western portion of Crow- a zone located adjacent and to the north of the large Brolga intrusion at Hemi. Over the coming months, the company will continue its infill drilling program at all the Hemi zones to enable a robust resource estimate targeting a high level of JORC 2012 indicated category resources.

FY20 Results Highlights: During the year ended 30 June 2020, the company continued its exploration activities at the Mallina Gold Project and made a major gold discovery in the central area called as Hema. In February 2020, the company commenced RC and diamond drilling in the area. By the end of FY20, the company had conducted a total drilling of 67,500 metres, which outlined a mineralisation footprint spanning 2,000m north-south and 1,200m east-west across the Aquila, Brolga and Crow zones. For the full year, the company incurred a total net loss of $3.98 million. During the year, the company completed capital raisings of around $53 million. As at 30 June 2020, the company had total cash and cash equivalent of $28.152 million.

FY20 Results (Source: Company Reports)

What to expect: Looking ahead, DEG intends to maximise its shareholder value through its ongoing exploration and development work at The Mallina Gold Project. The company intends to continue drilling at Hemi and within its corridor to discover the extents of the mineralisation whilst also infilling the discovery to provide a resource by the middle of 2021.

Stock Recommendation: Over the last six and three months, the stock of DEG has provided a return of 223.52% and 48.64%, respectively. The stock is currently inclined towards its 52-weeks high price of $1.600, demonstrating that the stock might have factored in most of the positives.  On the technical analysis front, the stock has support level of ~A$0.71 and a resistance of ~A$1.39. Considering the decent returns in the past three and six months period, and its current trading level, we suggest investors to wait for better entry levels and give an “Expensive” rating for the stock at the current market price of $1.100, down by 3.084% on 30 October 2020.

Gold Road Resources Limited

September Quarter Highlights: Gold Road Resources Limited (ASX: GOR) is an Australian gold producer with a Tier 1 mine and exploration projects in the underexplored and highly prospective Yamarna Greenstone Belt in Western Australia’s north-eastern Goldfields. The company is a 50% owner of Gruyere gold mine. As of 30 October 2020, the company’s market capitalisation stood at ~$1.19 billion. During the September 2020 quarter, Gruyere produced 55,919 ounces of gold (100% basis) at attributable AISC of A$1,488/oz. Over the quarter, the company sold 31,480 ounces at A$2,420/oz. The company generated a sales revenue of $76.2 million in September quarter. Over the quarter, the company’s net cash and equivalents increased by $18.9 million to $103.0 million.

September Quarter Summary (Source: Company Reports)

Change of Directors’ Interest: On 30^th October 2020, the company announced that one of its Directors, Brian Kenneth LEVET, who hold an indirect interest in the company, has acquired 20,000 fully paid ordinary shares at a total consideration of $26,500, via on market purchase of shares.

Outlook: Gruyere is on track to achieve its FY20 annual guidance 250,000 to 270,000 ounces with AISC expected to be in between A$1,250-A$1,350/oz. It is expected that Gruyere’s production rate will be lifted and its AISC will be reduced in the December 2020 quarter. As per the recently approved inaugural Dividend Policy, the company is planning to pay annual dividend payment which in aggregate represents 15% – 30% of free cash flow for each calendar year, payable by way of two half-yearly payments.

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

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock of GOR has corrected by 28.06% and is trading lower than the average 52-weeks price level band, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~A$1.04 and a resistance of ~A$1.79. We have valued the stock using Price to earnings multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). For the purpose, we have taken peers like Saracen Mineral Holdings Ltd (ASX: SAR), Resolute Mining Ltd (ASX: RSG), Regis Resources Ltd (ASX: RRL), etc. Considering the decent production performance from GOR’s 50% owned Gruyere fold mine, its debt-free balance sheet, recently announced dividend policy, current trading levels, and decent outlook, we give a “Buy” rating for the stock at the current market price of A$1.320, down by 2.584% on 30 October 2020.

Comparative Price Chart (Source: Refinitiv, Company Reports)

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