SSR Mining Inc.

SSR Mining Inc. (TSX: SSRM) is a minerals company focused on mining precious metals in the Americas. More than half of Silver Standard's revenue is attributable to the production of gold, with a significant portion derived from silver production. 

Key Highlights:

• Robust production profile: During the first half of FY21, the company executed strong production and reported gold and silver production of 340,789 oz and 3,782 koz, significantly higher than 137,886 oz and 2,136 koz, respectively a year ago. Production of lead and Zinc also stood robust during the first half at 15,806 klb and 7,014 klb, respectively, jumped from 6,712 klb and 2,181 klb, respectively in H1FY20. The growth was supported by record-high production from Marigold (quarterly basis), Seabee (both quarterly & half-yearly) and Puna mines (half-yearly).

• Growth in cash flow: The company generated its cash from operating activities at USD 293.822 million in H1FY21, significantly higher than USD 87.133 million in pcp. The increase was primarily driven by exuberant growth in earnings (USD 111.366 million in H1FY21 v/s USD 17.700 million in pcp). Notably, the company reported a free cash flow of USD 177.016 million, climbed from USD 6.041 million in pcp, which is a key positive.

• Encouraging FY21 Guidance: For FY21, the company expects its consolidated production of 720 – 800 koz of gold equivalent, significantly higher than 484.153 koz in FY20. Consolidated all-in sustaining costs (AISC) is expected in between USD 1,050 - 1,110/ AuEq oz. The company would allocate USD 87 million for the exploration activities.

Q2FY21 Financial Highlights:

• SSRM impresses with its quarterly results, wherein the company posted revenue of USD 376.950 million, surged from USD 92.485 million in Q2FY20. The growth was aided by the higher gold sales of 173,620 oz compared to 46,387 oz in Q2FY20. Moreover, the average realized gold price stood at USD 1,820 /oz v/s USD 1,722 /oz in the previous corresponding period (pcp), which also supported the company’s income.
• Income from mine operations jumped to USD 154.855 million compared to USD 34.177 million in Q2FY20. The increase was aided by higher income, while a higher cost of sales (USD 222.095 million v/s USD 58.308 million in pcp) remained a drag.
• Operating income stood at USD 106.412 million as compared to an operating loss of USD 5.111 million a year ago. The increase was supported by significantly higher income from mine operations, partially offset by higher general and administrative expense and an increase in exploration, evaluation and reclamation expense. The company reported its AISC per gold equivalent ounce sold at USD 961, declined drastically from USD 1,734 in pcp.
• Net income soared to USD 51.604 million, as compared to a net loss of USD 6.276 million in the previous corresponding period.

Source: Company Report

Risks: The company’s financials are driven by the prices of underlying commodities in which the company deals in. Volatility in the commodity prices would take a toll on the company’s income and cash flows.

Valuation Methodology (Illustrative): Price to Cash Flow

Stock Recommendation:

The company reported an exuberant performance and robust cash flow growth in both Q2FY21 and H1FY21, supported by elevated productions from all the mines of the company, coupled with strong metal prices. Moreover, the group has provided encouraging guidance. We have valued the stock using the Price to CF-based relative valuation approach and arrived at a target price offering double-digit upside potential (in % terms). We have considered peers like Alamos Gold, Paan American Silver etc. Hence considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock at the closing price of CAD 21.25 on August 05, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on August 05, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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