Quarterly updates by three goldminers today Evolution Mining (ASX: EVN), Newcrest Mining (ASX: NCM), and Westgold Resources (ASX: WGX) coincided with an overnight fall that took the gold price (US$1691 an ounce) to its lowest level since the peak of covid in March 2020.
Today’s updates also follows over $3.5bn wiped off the value of gold miners on Monday with investors fearing absenteeism and bad weather could lead to further downgrades in gold production.
As a result of investor concerns over the yellow metal, the All Ords Gold Index (XGD) sold-off -16.37% last week and is down -26.93% over the year.
For the period ending 30 June, 2022 Evolution Mining gold production increased 16% to 172,722 ounces, near Bloomberg's consensus estimate of 173,059.
Group gold production is guided at around 720,000 ounces for FY23, versus 640,275 ounces in FY22, with production in the September quarter to be around 170,000 ounces.
The miner sees gold output rising to 800,000 ounces in FY24 and sees FY23 all-in sustaining costs of $1,240 per ounce.
FY23 sustaining capex is expected to be in the range of $190m-$240m with major capex of $530m-$600m.
As at 30 June 2022, Evolution had a cash balance of $572.4m and net debt of $1,210.5m.
Consensus on Evolution is Moderate Buy and based on Morningstar’s fair value of $3.65 the stock appears to be undervalued.
Based on the seven brokers that cover Evolution (as reported by FN Arena) the stock is trading with 30.2% upside to the target price of $3.04.
While Credit Suisse expects another challenging quarter ahead for gold and copper miners, the broker last week upgraded the stock to Neutral from Underperform, with the target price decreasing to $2.50 from $2.70.
Morgans believes the market has overreacted on the downside to Evolution’s lower guidance figures and has raised the rating to Add from Hold due to the recent share price fall.
The target is lowered to $3.23 from $4.45 on valuation.
Newcrest Mining meet its full year gold output target but fell short on copper.
The company delivered June quarter gold production of 637,000 ounces and copper production of 39,000 tonnes, resulting in FY22 gold production of 1.9m ounces down on FY21's 2.1m ounces but within the guidance range.
Due to lower mill throughput at Red Chris and Telfer, copper production was 3% lower than FY22 guidance at 121,000 tonnes.
FY22 all-in sustaining cost (AISC) of $1044/ounce delivered an AISC margin of 41% or $732/ounce.
CEO Sandeep Biswas noted lower group costs during what was a challenging inflationary environment.
“Over the last four quarters we have steadily increased our gold and copper production, driving lower group All-In Sustaining Costs and delivering a record-breaking annual cost performance at Cadia.”
Consensus on Newcrest is Moderate Buy.
Based on Morningstar’s fair value of 27.60 the stock appears to be undervalued.
Based on the seven brokers that cover Newcrest (as reported in FN Arena) the stock is currently trading with 33.9% upside to the target price of $25.64.
Ord Minnett’s average net present value has declined -15% across its commodities coverage following the hit to commodity markets over recent weeks.
As a result, the broker (04/07/22) has downgraded Newcrest to Hold from Buy and the target price decreases to $23.00 from $29.00.
While Citi likes Newcrest’s strong balance sheet, the broker will remain Neutral-rated until evidence that FY23 expectations are reset and until operations at Lihir improve.
Target price is cut to $22 from $29 due to rising cost concerns and as consensus lowers copper price expectations (08/07/22).
UBS notes while stocks [in the sector] are cheap, they do not yet present sufficient value to justify sector-wide buying.
The broker retains a Neutral rating and the target price decreases to $22.40 from $26.20.
The company delivered record fourth quarter gold production of 72,597oz at an all‐in cost of $1,843/oz.
Overall, the company achieved its FY22 production and cost guidance with group year-to-date gold production to 30 June 2022 of 270,884oz at an all-in cost $1,725/oz.
Westgold ended the quarter debt free and with closing cash and liquid assets of $190m.
Milestones within the sector included:
Big Bell mine production record of 272,124t at 2.6 grams of gold per tonne
Production milestone at Fortnum with 1000th bar poured
New high grade exploration discovery at Sovereign Reef
New long‐term power and gas contracts executed post‐quarter, which will deliver cost savings onwards of circa $100/oz at the current diesel price
New Fender underground mine commenced post‐quarter
Commenting on today’s result, Westgold Managing Director Wayne Bramwell noted a 42% increase in diesel price across the June quarter.
“However, the company is well placed to manage these impacts should they persist in the coming quarters… Our larger mines are operating at, or above steady state and operational delivery is becoming more consistent.”
Consensus on Westgold is Strong Buy.
Based on Morningstar’s fair value of $2.44 the stock appears to be undervalued.
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