AngloGold Ashanti Limited

AGG Details

Completed Sale of Sadiola Mine in SEMOS: AngloGold Ashanti Limited (ASX: AGG) is a gold exploration and mining company with presence in the US, Continental Africa, South Africa, and Australasia. As on 18^th January 2021, the market capitalisation of the company stood at ~$11.29 billion. On 4 January 2021, AGA, and its JV associate IAMGOLD Corporation (IMG) announced the completion of sale of full interests (40% each) in SEMOS to Allied Gold Corp (AGC). Prior to the completion of the deal, Republic of Mali (RoM) acquired 2% interest in SEMOS from AGA and IMG. Henceforth, each of the companies received a cash dividend of US$8.2 million from the Republic of Mali.

Q3FY20 Results: For the September 2020 quarter, the total output rose by 1% to 837koz on pcp basis, and total cash costs rose by 2% to $801k/oz due to robust performances spanning its operating asset base. Its free cash flows have risen by 290% YoY to $339 million, and cash flows from operations went up by 56% to $551 million on pcp basis. During the September quarter, the company finished Obuasi Phase I of the project within the budget and is progressing towards Phase II completion at the close of Q1FY21.

Production & Cost Summary Highlights, Q3FY20 (Source: Company Reports)

Outlook: The company is estimated to reach its full rate of production in 2H21 for Obuasi Redevelopment Project at an average of 350-400koz of gold a year, at an all-in sustaining cost (AISC) of $800-$850/oz (lesser than AGG’s average cost of production). AGG will decide on its investment decision on its 2 Colombian projects along-with B2Gold (operator) and will seek approval for the same in FY21. During FY20, the company has progressed well on its cost and production estimates for 8^th consecutive year. It has recorded the lowest gearing in almost 10 years and plans to double dividend pay-out ratio to 20% of free cash flows with dividends to be paid twice a year (bi-annually).

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

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of AGG gave a negative return of 23.49% in the past three months and a negative return of 36.63% in the past six months. The stock is currently inclined towards its 52-weeks’ low level of $4.80. On the technical analysis front, the stock of AGG has a support level of ~$5.359 and a resistance level of ~$6.353. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Newcrest Mining Limited (ASX: NCM), Northern Star Resources Limited (ASX: NST), Regis Resources Limited (ASX: RRL) and others. Considering the current trading levels, decent Q3FY20 results and the outlook for FY21, proposed doubling of dividend pay-out ratio, and valuation, we give a ‘Buy’ rating on the stock at the current market price of $5.830, down by 1.187% on 18^th January 2021.

AGG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Resolute Mining Limited

RSG Details

A Look at the CY20 Result Highlights: Resolute Gold Mining Limited (ASX: RSG) is an explorer and miner of gold deposits in Australia and Africa. Currently, it operates Syama gold mine in Mali and Mako gold mine in Senegal. As on 18^th January 2021, the market capitalisation of the company stood at ~$778.24 million. The company announced production of 89k oz for the December 2020 quarter from its Syama and Mako mines. For full CY20, RSG poured 395koz of gold and recovered 400koz at the given cost guidance range of AISC of US$1,074/oz. It held US$106 million of stock of bullion and cash at the close of CY20. The company plans to use the sale proceeds (US$105) from Bibiani gold mine for debt repayment.

1H20 & Q4FY20 Results: For H1FY20, the company recorded an increase of 33% in revenue to US$305 million and 24% increase in production to 217k ounces respectively on pcp basis. For December 2020 quarter, the company recorded 89,888oz of gold production at an AISC of US$1,074/oz. The production from Syama mine was impacted for 15 days due to industrial action at the mine. However, the production from the Mako Gold Mine in Senegal was in sync with the expected production of 43,387oz for the December quarter.

Q3FY20 Highlights: For the September 2020 quarter, AGG experienced a 19% decline in the production of gold at an average realised price of US$1,694/oz and AISC of US$1,284/oz. It held total cash, gold, and liquid assets of US$187.4 million for the September 2020 quarter, up from June 2020 quarter. Its total stock of cash and bullion stood at US$106.4 million for Q3FY20.  

Movement in Cash & Bullion, Q3FY20 (Source: Company Reports)

Outlook: For CY2021, the company expects its production of gold to be between 350-375k at an estimated AISC ranging from US$1,200-$1,275/oz, including corporate overheads from its operating mines. The company’s non-sustaining capital expenditure is expected to be around US$29 million for CY21.

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

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of RSG gave a negative return of 28.42% in the past three months and a negative return of 43% in the past six months. The stock is currently trading at its 52-weeks’ low price of $0.605. On the technical analysis front, the stock of RSG has a support level of ~$0.628 and a resistance level of ~$0.785. We have valued the stock using Enterprise Value to EBITDA based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Dacian Gold Limited (ASX: DCN), Aeris Resources Limited (ASX: AIS), Sandfire Resources Limited (ASX: SFR) and others. Considering the current trading levels, robust 1H20 results (higher NPAT, revenue and production), the outlook for FY21, higher life & performance of Mako gold mine, and resumption of full operations at Syama, and valuation, we give a ‘Buy’ rating on the stock at the current market price of $0.680, down by 3.547% on 18^th January 2021.

RSG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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