Is it time to have a great appetite for safe haven stocks - View on Nine Gold Miners?
 
With changes at global level with a different US administration in place and the recent turbulence erupting in Syria and North Korea, the demand for the precious metal - Gold has been on the uptrend. Amidst the current political instability, let us have a look at the following gold miners and their performance over the past few months.
 
Independence Group NL (ASX: IGO)


IGO Details

Nova ramp-up to name plate production expected in the September 2017 quarter:Independence Group NL (ASX: IGO) has reported that Nova will ramp-up to name plate production in the September 2017 quarter, 12 months earlier than planned in the Feasibility Study and some five years after discovery in July 2012. Further, total metal to be produced in concentrate is said to be 5,000t to 6,000t nickel and 1,900t to 2,300t copper for FY17.
 

Development Rate (Source: Company Reports)
 
IGO is also set to acquire initial 70% equity in Orion’s 100%-owned tenements, 60% in Creasy JV tenements and 65% in the GR JV tenement, as per the JV Agreement signed with Orion, covering highly prospective Fraser Range Nickel-Copper Project in Western Australia. During H1FY17, IGO’s revenue grew by 2% year on year (yoy) to A$223.1 million (1H16: A$218.8 million) led by higher zinc, copper and nickel realizations. However, revenues from Tropicana project decreased by 10% due to the cessation of grade streaming resulted in lower volumes. Profit after tax stood at A$20.2 million (1H16: Loss A$77.8 million) primarily driven byhigher underlying EBITDA and the non-recurrence of costs from theprevious corresponding half-year relating to impairment, acquisitionand integration costs of Sirius. However, reported operating cash flows of A$25.6 million (1H16: A$50.1 million) were impacted by the paymentof A$58.2 million as stamp duty taxes to the Western Australian State Government.The stock has corrected 17.35% year to date but rose 4.3% in last one month (as at April 12, 2017) owing to positive developments and gold price movements, and may see further tailwinds. We give a “BUY” on the stock at the current market price of $3.73
 

IGO Daily Chart (Source: Thomson Reuters)
 
Newcrest Mining Ltd (ASX: NCM)


NCM Details

Leveraging on long term growth opportunities:Newcrest Mining Ltd (ASX: NCM), through subsidiary Newcrest Operations Ltd, has signed an option and farm-in agreement with Alice Queen Ltd for Mendooran Project under which NCM will have right to earn-up 80% interest by incurring expenses of not less than $10 million. Newcrest has also tied up with Telstra, to become the first gold miner in the southern hemisphere to deliver O3b’s high-speed broadband through its new 100 megabits per second (Mbps) satellite link to the Lihir gold mine in New Ireland Province, Papua New Guinea. During H1FY17, Newcrest revenue grew by 17% yoy to $1807million while statutory profit and underlying profit grew by 131% and 333% to $187million and $273million, respectively. Increase in underlying profit primarily driven by the higher realizations from gold, copper and gold sales volumes, and lower operating costs. Again, this was partially offset by the strengthening of the Australian dollar against the US dollar. NCM is said to be on track to leverage medium-longer term growth opportunities as it targeted 14mtpa sustainable mill throughput by December 2017 and target of 17mtpa in the future. All mining assets continues generate positive free cash flows and maximizing value through further productivity efficiencies and cost reductions.
 

 
Growth drivers (Source: Company Reports)
 
Over the past six months (as at April 12, 2017), stock has moved up by 22% on account of better performance and gold prices, however we believe that it is trading at high levels. We give an “Expensive” recommendation on the stock at the current market price of $25.13
 

NCM Daily Chart (Source: Thomson Reuters)
 
Saracen Mineral Holdings Ltd (ASX: SAR)


SAR Details

Portfolio optimization initiatives are underway:Saracen Mineral Holdings Ltd (ASX: SAR) released its March quarter production update entailing gold production of 65,131oz which comprises 39,033oz from Carosue Dam and 26,098oz from Thunder box. This has been short of over 5,000oz from the guidance. Management also reiterated that their June quarter production guidance of 80,000oz is on track. The group’s grade mined at every ore source enhanced leading to an increase to an average of 2.3g/t as compared to 1.8g/t during the December quarter. For H1FY17, SAR had reported a revenue growth of 47% yoy at $186.6 million while NPAT grew by 89% yoy at $14.9 million. Revenue growth was largely driven by $14.0 million of gold sales during H1FY17 were derived from development activities at King of the Hills as previously guided. The company’s optimization initiatives have been underway to capitalize on recent production and drilling activities. However, longer term efforts targeting Karari and Thunderbox Deeps are found to be associated with generation of near term free cash flows, which raises some concern. Over the past one month (as at April 12, 2017), stock has moved up by 10.7%. Given the scenario and mixed view on production performance, we give an “Expensive” recommendation on the stock at the current market price of $1.085
 

SAR Daily Chart (Source: Thomson Reuters)
 
Dacian Gold Ltd (ASX: DCN)


DCN Details

Progress at Mt Morgans Gold Project: Dacian Gold Ltd (ASX: DCN) has collaborated with RUC Cementation Mining (RUC) for awarding the underground mining contract at its 100% owned Mt Morgans Gold Project (MMGP) in Western Australia. The group is done with the retail component of its fully underwritten 1 for 3.1 accelerated non-renounceable entitlement offer while raising a total of approximately $17.6 million under the final stage of Dacian Gold’s fully underwritten equity raising. This has helped the group successfully raise gross proceeds of about A$110 million. DCN had discovered two plus one-million-ounce gold deposits at Westralia and Jupiter over the past three years of intensive exploration; and had completed a $25 million equity raising for a 90,000m resource?infill drill out and to fund a definitive Feasibility Study, as per December 2016 updates.
 

Project Delivery Schedule (Source: Company Reports)
 
Over the past six months, the stock has declined by 38% in last six months (as at April 12, 2017). Given the volatile conditions while there is some boost from gold price movements, we give a “Speculative buy” recommendation at the current market price of $2.01
 

DCN Daily Chart (Source: Thomson Reuters)
 
Silver Lake Resources Ltd (ASX: SLR)


SLR Details

AISC is expected to fall during H2FY17:Silver Lake Resources Ltd (ASX: SLR) witnessed a stock plunge of about 5% on April 12, 2017 and has risen 20.4% in last six months (as at April 12, 2017). SLR has a JV with Musgrave Minerals Ltd with regards to the Cue Project, and the companies recently reported that strong assay results for a further eleven drill holes from the Lena gold prospect in the recently completed 4,000m reverse circulation (“RC”) drilling program on the Cue Project in the Murchison region of Western Australia have been received. For H1FY17, SLR had reported 1.9% yoy revenue growth at $107.30 million from the sale of 64,416 ounces of gold at an average realized gold sale price of A$1,665/oz compared with A$1,555/oz in H1FY16. The delayed delivery of high-grade Majestic ore to the Randalls gold processing facility towards the end of December impacted the sales to some extent. The company recorded a net profit after tax for the period of $8.259 million (2015: $0.198 million) while operating cash flow for the same period was at $23.474 million (2015: $22.161 million). Company’s cost profile is consistent and AISC is also expected to fall during H2FY17 as the new mines reach target production rates and the benefits of higher grade production is realized in the mill blend. SLR stock has been added in S&P/ASX 300 index effective March 20, 2017.
 
 

Focused operating strategy (Source: Company Reports)
 
Given some boost from present conditions, SLR stock might gain some momentum going forward. Owing to a mixed view, we give a “Hold” recommendation at the current market price of $0.555
 

SLR Daily Chart (Source: Thomson Reuters)
 
Evolution Mining Ltd (ASX: EVN)


EVN Details

Rise in capital expenditure:Evolution Mining Ltd (ASX: EVN) had reported that revenue for the H1FY17 grew by 17% yoy to A$711.2 million while operating costs for the period were at A$667 per ounce (US$503/oz) with AISC of A$978 per ounce (US$738/oz) placing Evolution among global leaders in low cost gold production. Mining operations were cash positive with $339.4 million (H1 FY16: A$289.3 million) representing a 17% yoy improvement. During H1FY17, capital expenditure surged by 46% to $125.8 million and had a significant impact on the resulting net mine cash flow of A$213.6 million (H1 FY16: A$202.9M). Evolution has guided FY17 group gold production guidance to 800,000 – 860,000 ounces at an AISC of A$900 – A$960 per ounce. Discovery remains an integral part of Evolution’s growth strategy. Discovery expenditure for the period was A$15.6 million. The company has further committed $25.0 – A$30.0 million to invest on discovery in on key projects at Cowal, Mungari and Mt Carlton in FY17. The group has reported that Mt Carlton gold mine in North Queensland had resumed operations post the passing of Tropical Cyclone Debbie. Over the past one month, the stock has moved up by 16.7% on account of gold price movement, better results and optimistic outlook for the remaining FY17. However, the stock is trading at higher levels and costs do raise some concerns. We give an “Expensive” recommendation at the current market price of $2.45
 

EVN Daily Chart (Source: Thomson Reuters)
 
Regis Resources Ltd (ASX: RRL)


RRL Details

Acquisition of new exploration license:Regis Resources Ltd (ASX: RRL) recently announced for acquisition of Blayney Gold Project exploration license near McPhillamys. RRL’s revenue for the H1FY17 increased by 4% yoy to $252.9 million with 144,699 ounces of gold sold at average price of $1,742 per ounce. RRL has increased FY2017 production guidance 300,000-330,000 ounces at AISC $980-1,050 while maintaining FY18 production target is at 340,000-370,000 ounces for Duketon Project. Over the past three months, the stock has moved up by 14% (as at April 12, 2017). We give an “Expensive” recommendation at the current market price of $3.60
 

RRL Daily Chart (Source: Thomson Reuters)
 
Northern Star Resources Ltd (ASX: NST)


NST Details

On track to deliver gold production of 485,000 to 515,000 ounces in FY2017:Northern Star Resources Ltd (ASX: NST) has seen a stock price rally of 6.8% on April 13, 2017 with a 15.8% rise in last one month (as at April 12, 2017). NST has released 17,222 ordinary fully paid shares from voluntary escrow on April 05, 2017 in accordance with the Company’s 2011 Employee Share Plan. During H1FY17, NST reported a revenue slip of 2% yoy while posting 21% and 61% yoy growth in EBITDA and Net profit after tax, respectively. Decline in sales was driven by a 13% reduction in gold volumes sold while increase in net profit after tax was largely driven by the $19.9 million profit from discontinued operations which includes a $15.3 million gain on the sale of the Plutonic gold operations. However, total current liabilities decreased owing to sale of the Plutonic operations as it aided in reducing debt. Cash flows from operating activities decreased by 36% yoy on account of higher amount of taxes paid. Overall, Northern Star has been rapidly progressing its exploration activities through significant investment expenditure with the goal of extending mine life at all operating centers and further creating a strong organic pipeline of future gold production. NST is on track for gold production of 485,000 to 515,000 ounces in FY2017. Given the trading scenario, we believe the stock is “Expensive” at the current market price of $4.86
 

NST Daily Chart (Source: Thomson Reuters)
 
Gold Road Resources Ltd


GOR Details
Drilling contracts awarded for Yamarna Exploration: Gold Road Resources Ltd (ASX: GOR) has 6,300 km² of highly prospective exploration tenements with a Joint Venture Partner in the Gruyere Gold Project. The group is progressing well with project optimisation in progress with major contracts set for award, future upside milling capacity available, better plant design, and so forth. GOR has set a total of A$30M budget for 2017. GOR has already completed tendering process to select drilling companies to conduct drilling on its 100% owned North Yamarna Project, the Gruyere JV Project and the South Yamarna Joint Venture Project, as part of the exploration budget. Two drilling contracts have now been awarded to proven Western Australian operators DDH1 Drilling (DDH1) and Ranger Drilling Services (Ranger). 
 

Exploration for 2017 (Source: Company Reports)
 
GOR stock rose 12.6% in last six months (as at April 12, 2017) and is trading at reasonable levels. We maintain our “Buy” recommendation at the current price of $0.62
 

GOR Daily Chart (Source: Thomson Reuters)

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