Equinox Gold Corp

Record Quarterly Results with 89,000 Ounces of Gold Production: Equinox Gold Corp (TSX: EQX) is a Canadian mining company with a portfolio of production, near-production, and exploration-stage projects. As on 17 June 2020, the market capitalization of the company stood at CAD3.14 billion.

Quarterly Performance (For the Period Ended 31 March 2020): Equinox Gold Corp reported a strong first quarter boosted by the production from its newly acquired assets. Despite the challenges related to the COVID-19 pandemic, the company achieved record gold production of 89,000 ounces and reported record earnings of USD43.2 million from mine operations. During the quarter, the company sold 82,629 oz of gold and reported revenue of USD130 million. In the same time span, EBITDA of the company stood at USD65.3 million. Equinox Gold retains a strong financial position and is fully funded for its organic growth plans with a cash balance of USD480 million.

Quarterly Financial Highlights (Source: Company Reports)

Equinox Gold Receives USD145 Million from Exercise of Warrants: The company has exercised the warrants held by various security holders for net proceeds of ~USD145 million. The company issued 21.4 million common shares in relation to the exercise of the warrants and retains USD480 million in cash. These proceeds will be used to advance the development and expansion projects of the company, to continue exploration, reduce debt, and for general corporate and working capital purposes.

Key Risks: EQX has evaluated various risks at each operation and has implemented business continuity protocols to operate efficiently. The uncertainties from the COVID-19 crisis and other factors may cause actual results and developments to differ from those expressed or implied. EQX is also susceptible to operational risks and hazards inherent with the business of mining.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company has given a proactive response to the COVID-19 pandemic and has experienced minimal disruption. EQX is focused on achieving its growth objectives and is in a strong financial position. The stock of EQX gave a return of 53.44% in the past three months and a return of 18.24% in the last one month. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target upside of higher single digit (in percentage terms). For the said purposes, we have considered Torex Gold Resources Inc, Osisko Gold Royalties Ltd, etc. as peers. The stock is trading close to its 52-weeks’ low level of CAD14.57 but holds the potential for growth as depicted by the EV/Sales Valuation approach. Considering the current trading levels, attractive returns in the past three months, decent financial performance and record quarterly production despite the pandemic, we recommend a ‘Hold’ rating on the stock at the current market price of CAD14.13, up by 0.4266% on 17 June 2020.

EQX Daily Technical Chart (Refinitiv, Thomson Reuters)

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