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:

• Increase in gold production: In Q1FY22, the company reported total gold production of 52,487 ounce, which is significantly higher than 45,882 ounce in Q1FY21. This was primarily driven by the additional gold production generated by the United States assets.

• Positive drilling result: Recently, the company reported 85,000 metre resource expansion through discovery drilling program in Nicaragua mine. The group reported new high-grade drill results at the Panteon North zone within the Company’s producing Limon Mine Complex. This high-grade discovery would expand the company’s reserve base and would likely to support the upcoming operations.

• Impressive short-term liquidity: In Q1FY22, the company reported its quick ratio and current ratio of 2.01x and 4.02x, respectively, as compared to the industry median of 1.56x and 2.61x, respectively. This indicates that the company has enough short term assets to meet its current liabilities.

Risks associated with the investment:

The company’s performance is correlated to 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.

Q1FY22 Financial Highlights:

Q1FY22 Income Statement Highlights (Source: Company Reports)

• In Q1FY22, the company reported its revenue of USD 99.5 million, higher than USD 82.0 million in pcp. Total sales stood at USD 52,487 ounce in Q1FY22, increased from USD 45,882 ounce in pcp.

• The company reported a higher production cost coupled with an increase in depreciation & amortization expense which resulted in elevated cost of sales. Hence, income from mine operations increased to USD 31.5 million v/s USD 29.9 million in pcp.

• The company reported higher general & administrative costs along with an increase in the share-based compensation expense. Moreover, an increase in the care & maintenance expense also remained as a drag. Hence, operating profit stood lower at USD 20.2 million v/s USD 27.1 million in pcp.

• The quarter was marked by higher finance expense, while reported a slide in income tax expense due to lower current income taxes. Net income dipped to USD 11.7 million in Q1FY22, compared to USD 16.6 million in pcp due to a lower income before taxes and higher finance expense.

  Valuation Methodology (Illustrative): Price to CF based

Analysis by Kalkine Group

Stock Recommendation:

For FY22, the company expects its gold production in between 220,000 – 235,000 ounces with an expected exploration capital requirement of USD 40 to USD 42 million. Total cash costs are expected in between USD 1,075 to 1,150 per ounce. 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 Karora Resources Inc, New Gold Inc etc. Considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock of CXB at the last closing price of CAD 1.22 on June 01, 2022.

One-Year Technical Price Chart (as on June 01, 2022). Analysis by Kalkine Group

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

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.