The company is a gold producer listed on the ASX and focused on Brazil. As at 31 December 2014, it had 5.4 million ounces resource with 1.3 million reserve ounces in optimised open pits. Maiden Urucum Underground mineral resource is 4.6 million tonnes @4.06 g/t gold for 634,000 ounces and total Measured and Indicated resources are 2.73 million tonnes @4.56 g/t gold for 400,000 ounces. Tucano Gold Mine is the third-largest gold mine in Brazil producing approximately 160,000 ounces per annum with a robust LOM Open Pit Mine Plan stretching for at least seven years. The financial position for the first half of FY 2015 showed cash and bullion as at 30 June 2015 totalling $ 22.4 million. The company has a USD 50 million facility with Banco Santander and Banco Itau at an interest rate of LIBOR +3% per annum and the unhedged facility is repayable in 10 equal quarterly instalments. The cash costs came to USD 913/ounce compared to USD 815/ounce for the same period of the previous year and all in sustaining costs were USD 1065 as opposed to USD 1010 of the prior corresponding period. The guidance for the second half of FY 2015 is gold sales of between 65,000 to 80,000 ounces with all in sustaining costs of between USD 850 and USD 950 per ounce. The results for the first half of FY 2015 show net sales revenue of $ 83.3 million compared to $ 110.6 million for the same period of the previous year, underlying EBITDA of $ 14.9 million opposed to $ 46.6 million of same period of previous year, and reported profit after tax of ($ 30.3 million) over $ 15.1 million of same period of previous year. Other financial information includes cash flow from operating activities of $ 9.2 million compared to $ 12.2 million of same period of previous year, cash and cash equivalents of $ 11 million compared to $ 22.9 million of same period of previous year, and basic EPS of ($ 0.04 per share) compared to $ 0.02 per share of same period of previous year.
Share Price Movement (Source: Company Reports)
Looking at the September 2015 quarter unreconciled sales for gold, BDR reported about 29,400 ounces over June quarter’s 21,045 ounces. Gold produced was of the order of 29,200 ounces over 21,457 ounces of June quarter. Throughput and grade at Tucano are estimated to be better during December quarter.
Financial Data (Source: Company Reports)
Overall, we note that this company is arguably the lowest cost gold producer in the world and is therefore better insulated against declining gold prices than its rivals. It also stands to gain the most from rising gold prices in the long-term and we recommend a Buy at the current price of $0.165.
BDR Daily Chart (Source: Thomson Reuters)
Newcrest Mining Limited (ASX: NCM)
NCM reported little weak results for the September quarter with gold production of 583,745 ounces and copper production of 21,337 tonnes. The average realised gold price has been indicated to be AUD 1,552/oz. There was a suspension of operations at Ridgeway and Hidden valley following fatalities which impacted production. However, the company retained the full year guidance. Another highlight was the mining being recommended at Cadia East Panel Cave 2. Among the highlights of the results for FY 2015 were all in sustaining cost of USD 789 per ounce, net debt reduction of USD 819 million, statutory profit of AUD 546 million and underlying profit of AUD 515 million, free cash flow of AUD 1.08 billion and Edge program cash benefit of around AUD 390 million to date. The company has met or exceeded its guidance for nine consecutive quarters. The financial performance was driven by the Edge program, the increased production of higher margin ounces from Cadia and the net effect of the lower AUD. As planned, production shipping was lower and the Edge mindset helped in the reduction of sustaining capital requirements. The fall in the USD gold price and the fall in USD copper price was offset by the weakening of the AUD against the USD.
Production Highlights (Source: Company Reports)
The strong balance sheet continues to remain a priority. Leverage ratio measured as net debt/EBITDA was targeted at less than 2x with the actual figure at 2.2 X, gearing ratio was targeted at less than 25% with the actual figure at 29%, the target for investment grade to be maintained was achieved and coverage by way of cash and undrawn bank facilities, targeted at USD 1 billion was USD 2.4 billion. The considerable restructuring that the company has gone through over the last few years has generated major cost savings which is put the company on a firm footing meaning that, despite the decline in the prices of gold, it is still expected to grow its bottomline at 6% to 7% over the next couple of years. The company has taken numerous efforts for considerable restructuring particularly for cost reductions which is of interest. In our opinion, the low price/book ratio make this an attractive long-term investment and we are accordingly rating the stock as a Buy at the current price of $13.64.
NCM Daily Chart (Source: Thomson Reuters)
Perseus Mining Limited (ASX: PRU)
This company, a gold producer focused on West Africa, and reported record profit after tax of $ 92.2 million or an EPS of 16.7 cents per share for the FY 2015. This represents an increase of 288% or $ 124.2 million over the previous year. Other highlights include a 26% increase in revenue; 10% decrease in expenses; foreign exchange gains of $ 52.4 million; a cash balance of $ 103.7 million amounting to 19.7 cents per share, an increase of 181% over the previous year; a combined value of cash and bullion of $ 127.3 million amounting to 24.2 cents per share, an increase of 61% over the previous year; an increase of 157% in working capital to $ 177.6 million and no third party debt. At the operational level, the company showed major performance improvements including an increase in gold production of 17% to 212,000 ounces, a decrease of 32% in all in site costs to USD 877/ounce and a steady average price for gold at USD 1324/ounce. The Edge program focuses on challenging the status quo and concentrates on safety, operating discipline, the generation of cash and profitable growth. This is not just another cost reduction program though it has delivered cash benefits of almost $ 400 million. It challenges the customary mindset towards safety while delivering more sustainable value. The Company’s operating segments include Australia, Ghana and Cote d’Ivoire. The Australia segment includes the investing activities and corporate management. The company has a reputation of being one of the most successful gold explorers in the world with a focus on underexplored gold belts in West Africa. The bulk of its reserves are in Edikan Gold Mine in Ghana and Ayantun with other gold resources held on its West African projects, Grumesa in Ghana and Tengrela in Côte d’Ivoire.
Reserves and Resources (Source: Company Reports)
The September quarter results entailed gold production of 44,267 ounces which is in consensus with half year guidance of 90,000 to 105,000 ounces for the Edikan Gold mine. Further, there was a 45% quarter-on-quarter reduction in unit mining costs and 15% of processing costs. The working capital at the end of the quarter has been reported to be $191 million with available cash and bullion of the order of $132 million. We believe that the stock has potential for growth and recommend it as a Buy at the current price of $0.405.
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