St Barbara Limited

SBM Details

FY21 Results Highlights: St Barbara Limited (ASX: SBM) is a gold producer with mining operations in Australia, Canada, and Papua New Guinea (PNG). SBM recently releases its financial results for the full year ending 30 June 2021. Major highlights of the results are as follows:

• Decline in Production: For FY21, SBM reported total production 327,662 ounces of gold, down by 14% on the previous year, due to lower production from Leonora and the suspension of operations at Simberi.
• Decline in Revenue: Due to lower production, the company witnessed a decline of 11% YoY in revenue to $740 million.
• Rise in Realised Gold Price: Average gold price for FY21 stood at $2,215/oz, up 2% on the previous year of $2,166/oz.
• Increases in Ore Reserves and Mineral Resources: SBM announced that its Ore Reserves increased by ~4% to 6.2 Moz of contained gold and its Mineral Resources increased ~13% to 13.1Moz of contained gold, net after depletion.

Production Summary (Source: Analysis by Kalkine Group)

Key Risks:

• Fluctuations in Gold Price: SBM is exposed to the risk related to the volatility in the gold prices as it creates revenue uncertainty.
• Change in Rules and Regulations: As the company’s operations are located in different jurisdictions, it is exposed to the risk associated with the changes in the laws or rules in any of the jurisdictions.

Outlook: For FY22, the company expects its gold production to be between 305,000 and 355,000 ounces at an AISC of between A$1,710 and A$1,860 per ounce. The restart of Simberi processing facility is expected in Q2FY22 and the consolidated gold production is forecast to be weighted marginally to H2FY22.

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: Over the last three months, the stock has corrected by 15.48% and is trading lower than the average 52-week price level band of $1.522-$3.530, offering an opportunity of accumulation. The stock has been valued using an EV/sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ median, considering the loss of production during the temporary suspension of Simberi operations, uncertainty surrounding the impact of COVID-19 pandemic on the company’s operations, risks associated with the fluctuations of gold price. For the purpose of valuation, few peers like Regis Resources Ltd (ASX: RRL), Newcrest Mining Ltd (ASX: NCM) and IGO Ltd (ASX: IGO), etc. Considering the increase in ore reserves and mineral resources, expected restart of Simberi processing facility, modest outlook, current trading level and valuation, we give a “Buy” rating on the stock at the market price of $1.605, as on 30 August 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia).

SBM Daily Technical Chart, Data Source: REFINITIV

St George Mining Limited

SGQ Details

Massive Nickel-Copper Sulphide at Mt Alexander Project: St George Mining Limited (ASX: SGQ) is a mining exploration company focused on nickel-copper sulphide discovery. The company recently announced a new EM target for massive nickel-copper sulphides at its flagship high-grade Mt Alexander Project. The rising number of significant mineralised intercepts are supporting the potential for a significant deposit at the Mt Alexander project.

June 2021 Quarter Highlights:

• Over the quarter, the company received various drilling and assay results that confirmed new nickel-copper sulphide discovery at Mt Alexander Project.
• SGQ commenced a scientific research project to characterise the unique nickel-copper sulphide mineralisation and intrusive geology in the Cathedrals Belt. It is expected that the finding of this research will enhance exploration vectoring for further discoveries.
• During the quarter, the company completed a private placement of fully paid ordinary shares of $7 million in new funds (before costs).
• At the end of the June 2021 quarter, the company had cash balance of $6.36 million.

Cash Balance Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the fluctuations in the prices of nickel. Further, the company is also exposed to the risks related to the COVID-19 uncertainties as it could disrupt the company’s operations. 

Outlook: Looking ahead, the company intends to continue drilling at the Cathedrals Prospect to test the high-grade mineralisation ahead of potential resource estimation. Considering the increasing nickel prices caused by the rise in battery metal demand, and proven high-grade nickel sulphide discoveries of Mt Alexander project, the company seems well placed for future growth.

Stock Recommendation: Over the last three months, the stock has corrected by 17.28% and is trading lower than the average 52-week price level band of $0.063 and $0.175. Considering the company’s progress in relation to the exploration programs, positive exploration results, current trading levels, and associated risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.067, up by ~0.751% as on 30 August 2021.

SGQ 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 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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