SSR Mining Inc.

SSR Mining Inc. (NASDAQ: SSRM) is a minerals company focused on mining precious metals in the Americas.

Key Highlights:

• Strong FY21 Guidance: For FY21, the company expects to produce 720,000 oz to 800,000 oz of Gold Equivalent higher than the FY20 production of 418,744 oz. The company is expecting to ramp-up of the Flotation circuit facility (Çöpler mine) in the mid-year of 2021. Notably, the group also expects lower All-in sustaining costs (AISC) within a range of USD 1,050 to USD 1,110/oz in FY21, lower than USD 1,138/oz in FY20, thanks to the cost initiatives strategies adopted by the company.

Source: Company Report

• Robust Cash Flow growth: During FY20, the company reported strong cash flow growth of USD 348.615 million, significantly higher than USD 145.844 million in FY19, supported by higher net income and positive working capital management.
• Acquired Alacer Gold Corp: The company completed the transaction with Alacer to create a leading intermediate precious metals producer with robust margins, strong free cash flow generation and long mine lives across four mining-friendly jurisdictions.

FY20 Financial Highlights:

• SSRM impresses with its full-year results, wherein the company posted revenue of USD 853.089 million, stood higher from USD 606.850 million in FY19. The increase was driven by the higher realized price of gold at USD 1,812/oz, v/s USD 1,394/oz in pcp and an average higher realized price of silver at USD 21.23/oz, v/s USD 16.26/oz in FY19.
• Income from mine operations stood higher at USD 308.642 million, as compared to USD 170.883 million in FY19. The increase was aided by higher income, partially offset by the higher cost of sales (USD 544.447 million v/s USD 435.967 million in pcp).
• Operating income stood at USD 202.713 million, as compared to USD 122.338 million, a year ago. The increase was supported by significantly higher income from mine operations, partially offset by higher general and administrative expense and an increase in exploration, evaluation and reclamation expense.
• Net income surged to USD 140.468 million, from USD 55.757 million in the previous year.
• The company posted cash and cash equivalents of USD 860.637 million, while total assets stood at USD 5,244.986 million.

FY20 Income Statement Highlights (Source: Company Report)

Risks: The group’s revenue is correlated to the international gold, copper and silver prices, and hence, price volatility in the international market would likely to dampen the company’s overall performance.

Valuation Methodology (Illustrative): EV to Sales based

Note: All forecasted figures have been taken from Thomson Reuters

Stock Recommendation:

The company is continuing exploration and concurrent development from the Ardich facility (Çöpler region) and expects its first production in 2023. Moreover, the group is also focusing on copper-gold exploration and advancement within the C2 Porphyry facility in the Çöpler mine. The company is continuing with cost reduction initiatives, which is expected to support the company’s overall margins. We have valued the stock using EV to Sales-based relative valuation approach and arrived at a target price offering double-digit upside potential (in % terms). We have considered peers like Pan American Silver Corp, Pretium Resources Inc and Alamos Gold Inc etc. Hence considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock at the closing price of USD 15.71 on April 08, 2021.

One-year Price Chart (as on April 08, 2021). Source: Refinitiv (Thomson Reuters)

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