Calibre Mining Corp (TSX: CXB) is a multi-asset gold producer with a portfolio of exploration and development opportunities in Nicaragua. Its project includes Pavon Gold Project, Borosi Gold Project, IamGold and Santa Rita. The company has only one revenue stream, being the sale of refined gold from its operations in Nicaragua.

Key Updates: 

• Reported highest mineral reserve till date: At the end of FY21, the company reported its mineral reserve of 1,013,000 ounces, surged remarkably 254% since FY19. Moreover, the company is able to extract an all-time high grade of 4.62 gms/tonne gold in FY21, which is impressive as it would trim down costs and increase in cash flows.

Source: Company Presentation 

• Robust margins: The company reported improved profitability margins as compared to the industry median, which indicates better operational efficiencies. Notably, in FY21, the company reported its operating margin at 28%, as compared to the industry median of 20.3%. Moreover, the company reported its net margin of 17.7% in FY21, higher than the industry median of 12.7%.

• Increase in gold production: In FY21, the company reported total gold production of 182,755 ounce, which is significantly higher than 136,009 ounce in FY20. This was primarily driven by higher gold processing from both Libertad and Limon mines.
  

Source: Company Presentation 

Risks associated with the investment:

The company’s performance is correlated with the international gold prices, and price volatility in the commodity prices are likely to dampen the company’s income and cash flows on account of lower realization.

FY21 Financial Highlights:

FY21 Income Statement Highlights (Source: Company’s Report)

• In FY21, the company reported revenue of USD 328.1 million, higher than USD 242.7 million in FY20. Total gold sales stood at 183,242 ounce in FY21, increased from 135,357 ounce in previous year.

• The company reported a higher production cost coupled with an increase in depreciation & amortization expense which resulted in elevated cost of sales (USD 223.8 million v/s USD 133.1 million in FY20). Hence, income from mine operations slide to USD 104.2 million v/s USD 109.6 million in FY20.
• The company reported a slight decline in general & administrative costs and a slide in share-based compensation expense. Moreover, absence of care & maintenance expense in FY21 supported the company’s profitability. Operating profit stood at USD 91.8 million v/s USD 88.5 million in FY20.
• The quarter was marked by lower finance expense, while reported a surge in income tax expense due to higher current income taxes. Net income dipped to USD 58.1 million in FY21, compared to USD 63.4 million in FY20.
  

Valuation Methodology (Illustrative): Price to Cash Flow

Analysis by Kalkine Group

Stock Recommendation:

In FY21, the company reported lower cash conversion period of 83.9 days, compared to 106.1 days in FY20. A lower cash conversion period indicates that the company is taking lower time to convert its investments to cash flows. We have valued the stock using the Price to CF based relative valuation method and have arrived at a single-digit upside (in percentage terms). For the said purposes, we have considered peers like Ero Copper Corp, New Gold Inc etc. Considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock of CXB at the closing price of CAD 1.51 on March 17, 2022.

One-Year Technical Price Chart (as on March 17, 2022). Analysis by Kalkine Group

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