Gold Road Resources Limited

GOR Details

Key Updates for Investors Consideration: Gold Road Resources Limited (ASX: GOR) is engaged in the mining and exploration of gold and other minerals. On 5 November 2021, the Vanguard Group, Inc. and its controlled entities have ceased to become a substantial holder in the company. As announced on 10 November 2021, the company referred to its all cash unconditional off-market takeover offer of $0.56 per share for Apollo Consolidated and its 19.9% interest in the company.

• However, the company has accepted an off-market takeover offer made by Ramelius Resources Limited in relation to its entire holding of Apollo shares (being 58,324,117 Apollo shares), which comprise $0.34 in cash and 0.1778 Ramelius shares.
• Following this, the company wrapped up the dispatch of its original bidder’s statement and stated that its offer would close on 8 December 2021.

Q3FY21 Financial Highlights:

• During the quarter, Gruyere produced 59,371 ounces of gold (100% basis) at an AISC of $1,697 per ounce as compared to 53,132 ounces (100%) at an AISC of $1,659 per attributable ounce in the June 2021 quarter. As a result, the company was unable to match the guidance for production.
• GOR recorded total gold sales of 28,350 ounces at an average price of $2,231 per ounce; this included delivery of 9,800 ounces at an average price of $1,836 per ounce into forward sales contracts.
• Subsequent to the end of the quarter, the company witnessed a substantial increase of 1.07 million ounces in the Gruyere Ore Reserve, which bolstered the total Gruyere JV Ore Reserves to 4.54 million ounces (100% basis) and extended mine life to 2032.
• The company paid an interim dividend of 0.5 cents per share for the six months to 30 June 2021.

Production Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Gold Price Risk: The company’s operational and financial health could be impacted by the adverse price movement in the prices of gold as it earns a major portion of revenue from the production and sale of gold.
• Regulatory Risk: GOR is exposed to a more complex regulatory environment; any failure in compliances could lead the business to fines, penalties etc.

Outlook:

• As a result of lower production in the quarter, the company revised its guidance and anticipates production guidance for December 2021 quarter in the range of 250,000 to 260,000 ounces (100% basis) as compared to previous guidance of 260,000 to 300,000 ounces.
• AISC for the CY21 is likely to be between $1,450 and $1,525 per attributable ounce.

Valuation Methodology: P/E 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: As on 30 September 2021, the company had cash and equivalents of $123.5 million as compared to $128.6 million as on 30 June 2021. The company also closed the quarter with zero drawn debts. The stock is trading at par to its 52-week high level of $1.630. The stock gave a positive return of ~31.57% and ~22.18% in the past three and six months, respectively. The stock has been valued using P/E multiple-based illustrative relative valuation and arrived at a correction of high-single-digit (in % terms). The company can trade at a slight discount to its peers’ median P/E multiple, considering the downgraded production guidance and disruption in the commodity prices. For the purpose of valuation, peers such as Ramelius Resources Ltd (ASX: RMS), Regis Resources Ltd (ASX: RRL), and OceanaGold Corp (ASX: OGC) have been considered. Considering the expected correction, solid rally in the past few months, current trading levels and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.630, as on 12 November 2021, 2:23 PM (GMT+10), Sydney, Eastern Australia.

GOR Daily Technical Chart, Data Source: REFINITIV  

Pantoro Limited

PNR Details

Q1FY22 Financial and Operational Highlights:  Pantoro Limited (ASX: PNR) is engaged in gold mining, processing and exploration in Western Australia. During the quarter ended 30 September 2021 (Q1FY22), the company recorded gold production of 9,473 ounces at an AISC of $1,435/Oz at 100% owned Halls Creek Project. The company met its production guidance during the quarter but was unable to match guidance for AISC.

• During the quarter, the company surpassed its cashflow guidance of $1.4 – 4.4 million, and project cash flow stood at $4.6 million inclusive of all capital and exploration cost.
• In the month of July 2021, the company made the final payment of $10 million for the acquisition of 50% interest in the Norseman gold project.
• Subsequent to the end of the quarter, the company finished acquisition of 19.9% interest in Maximus Resources at a consideration of $4.3 million and secured a $30 million corporate debt facility with Global Credit Investment.

FY21 Financial Summary:

• During FY21, the company’s total mineral resources stood at 22 Mt @ 3.6 g/t for 2.6 million ounces, and ore reserves were 6.7 Mt @ 2.1 g/t for 493,000 ounces.
• PNR recorded a gross profit of ~$17.91 million as compared to a gross loss of ~$8.27 million in FY20.

Gross Profit (Source: Analysis by Kalkine Group)

Key Risks:

• Environmental and Climate Risk: The company’s exploration could be impacted by an adverse change in the environment and climate, and the operational performance could be hampered.
• Commodity Price Risk: PNR’s operational and financial performance could be impacted by the negative movement in the prices of the commodities globally.

Outlook:

• With respect to Halls Creek Operations, the company anticipate production of 9,000 oz in Q2 and Q3FY22 with a tolerance of +/- 10%.
• In addition, the company expects to report net cashflow in the ambit of $1.4 - $4.4 million for Q2 and Q3FY22, respectively.
• The company is scheduled to conduct the 2021 Annual General Meeting on 17 November 2021.

Valuation Methodology: P/E 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 company closed the September 2021 quarter with cash and gold of $34.6 million. The stock is trading near to its 52-week high level of $0.260. The stock gave a positive return of ~17.07% and ~14.28% in the past one and three months, respectively. The stock has been valued using P/E multiple-based illustrative relative valuation and arrived at a correction of high-single-digit (in % terms). The company can trade at a slight discount to its peers’ average P/E multiple, considering the COVID-19 headwinds and falling production guidance. For the purpose of valuation, peers such as Evolution Mining Ltd (ASX: EVN), Northern Star Resources Ltd (ASX: NST), and Silver Lake Resources Ltd (ASX: SLR) have been considered. Considering the expected correction, solid rally in the past few months, current trading levels and key risks associated with the business, we suggest investors to book profit, and give a ‘Sell’ rating on the stock at the current market price of $0.240, as on 12 November 2021, 12:15 PM (GMT+10), Sydney, Eastern Australia.

PNR Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decisions should be made depending on the investors’ appetite for 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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