Stocks’ Details 

Anglogold Ashanti Limited

Sale of Morila Limited: Anglogold Ashanti Limited (ASX: AGG) is a global gold mining company. The market capitalisation of the company as on 23 December 2020, stood at ~$11.67 billion. As per a recent update, AGG and Barrick Gold Corporation completed the sale of their interest in Morila Limited, to Firefinch Limited for a cash consideration of US$28.8 million.

Year End FY2020 Update: The company remains on track to meet the cost and production guidance for 2020. It completed the sale of its South African assets to Harmony Gold Mining Company Limited, during the year. AGG expects the free cash flow generation in FY20 to be decent and plans to double the dividend pay-out ratio.

During 3QFY20, there was an increase of 290% in the free cash flow of the firm to US$339 million, when compared with the pcp. This was achieved as a result of lower costs, capital expenditure and a 30% rise in the gold price. The cash flow from operating activities grew by 56% to US$551 million in the quarter, compared to the prior corresponding period. The gold produced and sold were marginally on the higher side during the quarter, as compared to the pcp.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company reinstated its guidance reflecting greater certainty on annual production, costs and capital expenditure. During FY20, AGG expects to produce between 3.030Moz and 3.100Moz of gold, including 9 months of operation from South African assets. It anticipates all-in sustaining costs between US$1,060/oz and US$1,120/oz.

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: AGG has been able to produce robust operating performance, despite the outbreak of the COVID-19 pandemic. It is upbeat about its business outlook and has reinstated its guidance on the upside. As per ASX, the stock of AGG gave a negative return of 18.14% in the past three months and a negative return of 3.22% in the past one month. As per ASX, the stock of AGG is trading below its average 52 weeks’ trading range of $4.800-$14.000, proffering a decent opportunity for the investors to enter the stock. On a technical front, the stock of AGG has a support level of $4.819 and a resistance level of $7.884. We have valued the stock using an EV/Sales multiple based illustrative relative valuation and have arrived at a target price with an upside of lower double-digit (in % terms). For the purpose, we have taken peers such as Northern Star Resources Limited (ASX: NST), Resolute Mining Limited (ASX: RSG), Evolution Mining Limited (ASX: EVN), to name a few. Considering the current trading levels, strong operating performance, decent rise in free cash flows, rise in gold price and positive outlook, we recommend a ‘Buy’ rating on the stock at the current market price of $6.00, down by 1.640% as on December 23, 2020.

Regis Resources Limited

Approval for Mine Development: Regis Resources Limited (ASX: RRL) is engaged in the exploration, evaluation and development of gold project in Australia. The market capitalisation of the company as on 23 December 2020, stood at ~$1.90 billion. As per the latest updates, the company's board has approved the development of a new underground mine under the Garden Well open pit on the GWS underground gold (Au) Project.

FY20 Financial Update: EBITDA during the year increased by 28% to ~$394 million when compared with the pcp. RRL delivered NPAT of ~$200 million with a margin of 26%, during FY20. It had a comfortable cash position of $192.43 million as on 30 June 2020. The company declared full-year dividends at 16c per share.

FY20 Performance (Source: Company Reports)

Outlook: RRL expects gold production to be in line at ~355,000 – 380,000 ounces in FY21, with all-in sustaining cost at $1,230 - $1,300 per ounce. Growth capital is expected to be ~$50-60 million and exploration expense at ~$35 million.

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 company is optimistic about its near-term outlook and expects further revenue headroom with the development of a new underground mine. The stock of RRL gave a negative return of 28.79% in the past three months and a negative return of 3.88% in the past one month. As per ASX, the stock of RRL is trading below its average 52 weeks’ trading range of $2.900-$6.180, proffering a decent opportunity for the investors to enter the stock. On a technical front, the stock of RRL has a support level of $3.59 and a resistance level of $4.022. We have valued the stock using an EV/Sales multiple based illustrative relative valuation and have arrived at a target price with an upside of lower double-digit (in % terms). For the purpose, we have taken peers such as Northern Star Resources Limited (ASX: NST), Western Areas Limited (ASX: WSA), St Barbara Limited (ASX: SBM), to name a few. Considering the current trading levels, upside production guidance and decent financial performance, we recommend a ‘Buy’ rating on the stock at the current market price of $3.710, down by 0.269% as on December 23, 2020.

Tribune Resources Limited

Commenced Phase 2 Resource Drilling: Tribune Resources Limited (ASX: TBR) is involved in exploring and development as well as production activities in the company’s East Kundana JV tenements. The market capitalisation of the company as on 23 December 2020, stood at ~$301.69 million. As per a recent update, the company has started phase 2 resource drilling at its ~1.81 million ounce Japa Gold Project, in Ghana.

September 2020 Quarterly Update: During Q1FY21, the Rand and Tribune toll processed 150,295 tonnes of ore. The company also did mineral resource estimation for the Adiembra deposit at the Java Project in Ghana, and an inferred resource of 21 million tonnes at 2.7g/t for 1.81 million ounces of gold was defined.

During the quarter, receipts from customers were down to $31.76 million. The reduction in receipts along with high operating costs resulted in net cash outflow from operations to $4.46 million. The company had cash and equivalents of $5.399 million as on 30 September 2020.

Q1FY21 Cash Flow from Operations

Outlook: The company intends to continue exploration drilling in the Pode orebody, the Startrek trend east of Rubicon and the west of the Hornet Main Vein. It also plans further surface drilling for the Golden Hind and Hornet open-pit prospects.

Stock Recommendation: Despite the challenging business environment owing to COVID-19 pandemic, the company has announced a dividend of 20 cents per share to its shareholders. The stock of TBR gave a negative return of 25.66% in the past three months and a negative return of 12.38% in the past one month. As per ASX, the stock of TBR is trading below its average 52 weeks’ trading range of $4.450-$8.870. On a TTM basis, the stock has a Price to Book multiple of 1.4x, lower than the industry median (Basic Materials) of 2.7x. On a technical analysis front, the stock of TBR has a support level of $5.181 and a resistance level of $6.414. Considering the current trading levels, the start of phase 2 drilling in Japa Gold Project and further exploration and drilling activities in the pipeline which gives revenue visibility, we recommend a ‘Buy’ rating on the stock at the current market price of $5.520, down by 4% as on December 23, 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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