Teranga Gold Corp

Teranga Gold Corp (TSX: TGZ) is a mining company based out of Canada, which is engaged in the business of exploring, producing and selling of gold. The Company carry its exploration activities in the West African region based in Senegal. TGZ owns and operates Sabodala Gold mine based in Senegal.

Financial Highlights – Second Quarter of FY2020 (31^st March 2020, USD, Thousand)

(Source: Quarterly Report, Company Website) 

In the second quarter of the financial year 2020, driven by an increase in gold sold and higher average realized gold prices, the revenue in Q2 increased by 96% to USD 164,177 thousand (Q2 FY2019: USD 83,554 thousand). The revenue in H1 FY2020 stood at USD 298,291 thousand (H1 FY2019: USD 175,681 thousand), reflecting an increase of 70%. The EBITDA and adjusted EBITDA surged significantly by 135% and 137%, respectively, in Q2 FY2020. Driven by higher revenue and EBITDA, the reported net profit attributable to shareholders stood at USD 2,368 thousand in the second quarter of FY2020 (Q2 FY2019: net loss attributable to shareholders of USD 7,581 thousand). The Company reported net profit attributable to shareholders of USD 18,554 thousand in H1 FY2020 (H1 FY2019: a net loss attributable to shareholders of USD 10,300 thousand). The operating cash flow prior to working capital changes surged by 84% and 187% in H1 and Q2,respectively in the financial year 2020.

Share Price Performance

TGZ 1 year daily technical chart. Source: Refinitiv (Thomson Reuters)

Teranga Gold Corp shares closed at CAD 14.59 at the time of writing after the market close on 27 August 2020. Stock 52 week High is CAD 16.80 and Low is CAD 3.86.

Key Risks

The market conditions in which the Company operates is full of challenges and might impact the operational performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the Company. Liquidity and interest rate risks could affect the operations of the Company.

Conclusion

The Company has shown an increase in financial performance in the first half and the second quarter of the financial year 2020. Both the top-line and the bottom-line performance have improved, with improved profitability for the period. The recent increase in the gold prices in the global markets will improve financial performance and bring operational stability. The liquidity position of the company remained strong with the well-positioned balance sheet. The cash costs for the period has increased significantly by 10% and 16% in Q2 and H1 FY2020 versus FY2019 data for the same period. The Company’s Wahgnion process plant is performing better than expected performance and resulted in an increased material movement and processing. The Company operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and reducing costs to preserve cash.

Based on the above rationale, we have given a “Hold” recommendation for Teranga Gold Corp at the closing price of CAD 14.59 (as on 27 August 2020).

Disclaimer

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