Teranga Gold Corp

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

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

(Source: Quarterly Report, Company Website) 

In the first quarter of the financial year 2020, driven by an increase in gold production by 27 per cent for the period, the revenue stood at USD 134,114 thousand as against USD 92,127 thousand in the Q1 of the financial year 2019, reflecting an increase of 46 per cent. The Gross profit surged by 41 per cent to USD 39,461 thousand in Q1 FY2020 from USD 28,073 thousand in Q1 FY2019. The EBITDA stood at USD 66,486 thousand in the first quarter of the financial year 2020 versus USD 39,079 thousand in Q1 FY2019, reflecting an increase of 70 per cent. The Adjusted EBITDA increased by 36 per cent to USD 54,372 thousand in Q1 FY2020 from an adjusted EBITDA of USD 40,046 thousand in Q1 FY2019. Reported Net profit attributable to shareholders stood at USD 16,186 thousand in the first quarter of FY2020 versus a Net loss attributable to shareholders of USD 2,719 thousand in Q1 FY2019. The adjusted Net profit attributable to shareholders surged by 212 per cent to USD 6,951 thousand in Q1 FY2020 versus USD 2,230 thousand in Q1 FY2019. The operating cash flow prior to working capital changes surged by 9 per cent to USD 28,740 thousand for the period. The operating cash flows in Q1 FY2020 declined by 97 per cent to USD 1,503 thousand, reflecting supplies build-up, settlements of gold advances and swings in inventory stockpile.

Share Price Performance

Daily Chart as of 26^th June 2020, after the market close (Source: Refinitiv, Thomson Reuters)

Teranga Gold Corp shares closed at CAD 12.01 at the time of writing after the market close on 26^th June 2020. Stock 52 week High and low were CAD 12.05 and CAD 3.74, respectively.

Key Risks

The market conditions in which the Company operates is full of challenges and might impact the operation 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 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 21 per cent versus FY2019 data for the same period. The Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs to preserve cash. The commodity market is extremely volatile, and on the lower side, and the Company has taken additional measures to improve the long-term sustainability.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of CAD 12.01 (as on 26^th June 2020).

Disclaimer

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