Stocks’ Details

OceanaGold Corporation

OGC Reports Strong Exploration Results:OceanaGold Corporation (ASX: OGC) is engaged in the development and exploration of gold. Recently, OGC reported the resignation of Dr Nora L. Scheinkestel from the Company’s Board of Directors.

Q3FY19 Operational Highlights for the Period ended 30 September 2019: OGC announced its quarterly results, wherein the company reported revenue at US$133.6 million as compared to US$186.8 million in Q3FY18. The company reported net loss of US$21.9 million as compared to a profit of US$21.7 million in the previous corresponding period.The group’s earnings were impacted by lower sales due to Didipio. During the quarter, the company reported development of Martha UG underway at Waihi, followed by solid exploration results across the business. As on 30 September 2019, the company reported total assets at US$2,019.4 million and total shareholder’s equity at US$1,539 million.


Q3FY19 Operational Highlights (Source: Company Reports)

Guidance:In 2019, the company expects a capital investment in the range of US$240 million to US$260 million, which includes general operating expense of US$40 million to US$45 million, growth capital of US$100 million to US$105 million, pre-strip & capitalised mining expense between US$63 million to US$68 million, and exploration investment between US$37 million – US$42 million.

Valuation Methodology: Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters), *1 USD = 1.45 AUD

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

Stock Recommendation:The stock of OGC is quoting at $2.760 with a market capitalization of $1.74 billion. At the current market price, the stock is trading at the lower band of its 52-week trading range of $2.49 to $5.030. The stock has generated negative returns of 29.65% and 22.65% in the last three months and six-months, respectively. The company is expecting increased production from Macraes and Haile while the company also expects operational improvements from Haile. Considering the aforesaid facts, we have valued the stock using a relative valuation method, i.e., price to earnings multiple. We have taken the peers like Evolution Mining Ltd (ASX: EVN), St Barbara Ltd (ASX: SBM), Newcrest Mining Ltd (ASX: NCM) and arrived at target price of lower double-digit (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the current market price of $2.760, down 1.429% as on 10 January 2020.

Evolution Mining Limited

Evolution Mining Produced 170,890 ounces of Gold in December 2019 Quarter: Evolution Mining Limited (ASX: EVN) is engaged in mine operations, mine development, exploration and the sale of gold and gold/copper concentrate in Australia. The company has a market capitalisation of $6.49 billion on 10^th January 2020.

The company has provided preliminary December 2019 quarter results. The total gold production during the December quarter stood at 170,890 ounces at an All-in Sustaining Cost (AISC) of $1,069 per ounce. YTD production stood at 362,857 ounces at an AISC of A$1,040 per ounce. The company reported operating cashflow of $233.1 million and net mine cashflow of $144.0 million.

Operations Update for the December Quarter: The company is expecting to witness an increase in production costs by more than 40% as recent grade control and drilling discovered orebodies to be narrowing at shallower levels than earlier modelled.Earlier, the company’s Mt Carlton mine was expected to produce 95,000 to 105,000 ounces in FY20. But in the recent update, the company has reduced its production guidance to 70,000 from 75,000 ounces for FY20. The company found that the orebodies were narrower than expected, which means the AISC will also increase from $850 an ounce to $1,150 to $1,225 per ounce. Now, the company is targeting total production at the bottom end of guidance of around 725,000 ounces while the AISC guidance of $940 to $990 per ounce remains unchanged.

EVN Completes an Orientation Aircore Drilling Program: The company has completed an orientation aircore drilling program along the Big Bell and Cuddingwarra Shear Zones within the +800km² Murchison JV Project area. The company has advised that a total of 24 vertical aircore hole have been drilled for an average depth of 37m/hole.

In FY19, the company reported a statutory profit after tax amounting to $218.2 million, down 17% on prior corresponding year.


FY19 Performance (Source: Company Reports)

Valuation Methodology: Price to Cash Flow Multiple Approach

Price to Cash Flow Based Valuation (Source: Thomson Reuters)

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

Stock Recommendation: The company witnessed a CAGR of 22.7% and 28.92% in revenue and gross profit respectively, over the period covering FY15 to FY19.As per ASX, the stock has witnessed correction of 19.45% and 13.80% in three months and six months, respectively. EBITDA margin and net margin of the company stood at 46.7% and 14.5% in FY19, as compared to industry margins of 28.7% and 10.9%, respectively. Considering the above factors, we have valued the stock using Price to Cash Flow based relative valuation method and for the purpose, have taken the peer group Newcrest Mining Ltd (ASX: NCM), Northern Star Resources Ltd (ASX: NST), Independence Group NL (ASX: IGO), etc. Therefore, we have arrived at a target price of lower double-digit upside (in % terms). Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $3.580, down by 6.037% on 10^th January 2020 on account of the release of operations update.
 

Silver Lake Resources Limited

 
Completed 100% Compulsory Acquisition of ESR’s Shares: Silver Lake Resources Limited (ASX: SLR) is engaged in the production and exploration of gold. On 8^th January 2020, the company announced that it has completed the acquisition of the outstanding ordinary shares in EganStreet Resources Limited and now holds 100% of the latter’s shares.

Changes in Equity Securities: On 8^th January 2020, the company also announced the issuance of 1,628,116fully paid ordinary shares in the company.These shares were issuedas the final consideration for the compulsory acquisition of the remaining shares in Egan Street Resources and is in accordance with SLR’s Offer.
 
September Quarter 2019: The company delivered group gold production of 59,288 ounces and 734 tonnes of copper at an AISC of A$1,260/oz. The company reported cash and bullion of $155.2 million at the end of the September quarter. Net cash inflow from Mount Monger came in at $13.6 million, whereas from Deflector stood at $24.2 million.
 

Gold Production Highlight (Source: Company Reports)
 
Outlook: For FY2020, the company anticipates sales in the range of 215,000 to 230,000 ounces gold with AISC in the range of A$1,375 - A$1,450 per ounce.
 
Valuation Methodology: Price to Book Multiple Approach

Price to Book Based Valuation (Source: Thomson Reuters)
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: As per ASX, the stock gave a return of 11.89% in past six months.Currently, the stock is trading above the average of its 52-week high and low of $1.525 and $0.510, respectively.  As on 10 January 2020, the company’s market capitalisation stands at ~$1.2 billion, with 879.84 million outstanding shares.The strong balance sheet and cash flow generation allow the company to rapidly advance the pipeline of advanced exploration targets.Considering the above scenario, we have valued the stock using price to book value based relative valuation method and for the purpose, have taken the peer group - Ramelius Resources Ltd (ASX: RMS), Resolute Mining Ltd (ASX: RSG), Gold Road Resources Ltd (ASX: GOR), etc. Therefore, we have arrived at a target price with an upside of higher single-digit (in % terms). Hence, we have a watch stance on the stock at the current market price of $1.315 per share, down 3.663% as on 10 January 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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