Calibre Mining Corp. (TSX: CXB) is a Canadian-listed, Americas-focused, growing mid-tier gold producer with a strong pipeline of development and exploration opportunities across Nevada and Washington in the USA, and Nicaragua.  Its project includes Pavon Gold Project, Borosi Gold Project, IamGold, and Santa Rita. 

Investment highlights

• Acquired Fiore Gold: The announcement of the acquisition of Fiore Gold, which was completed on January 12, 2022, strengthened management's commitment to the company's growth. By adding a diverse asset base, immediate production, and substantial growth and exploration upside in Nevada, this deal continues the company's emphasis on consistently creating value for shareholders.

• Robust 2022 Guidance: Due to sustained strong production growth and operational execution, the Company achieved the high end of its 2021 output projection. The company produced good operational cash flows and self-funded considerable exploration and mine development while increasing cash flow year after year. In addition, it will reinvest in Nicaragua and Nevada to expand the asset base and improve yearly output. As a result, the company has released robust gold production estimates for FY 2022, which range from 220,000 to 235,000 ounces.

• Elevated cash from operating activities: The firm generated increased cash flows of USD 105.6 million in FY 2021, compared to USD 81.2 million in pcp, thanks to agile management and operational efficiency. The stoppage of activities in Q2 2020, as well as an increase in ore transport to Libertad from 2020 to 2021, contributed to the greater annual cash flow.

• Strong Financial Position: The Company has USD 86.7 million in cash and receivables as of December 31, 2021, compared to USD 59.0 million in the previous year. Working capital grew by USD 27.7 million, or 40%, in 2021, as a result of a USD 24.3 million rise in cash supplied by operating operations and larger supply inventories, somewhat offset by higher taxes payable. During 2021, the Company's increased cash and strong working capital position helped to reduce liquidity risk, boost financial flexibility, and give options to invest in various growth opportunities.

• Industry beating margins: The Company maintained its pace and witnessed spirited performance across its margin matrix. In addition, the management’s solid determination helped them leap the industry median margins on many fronts in FY 2021, which exhibits the competitive advantage of the company within the industry. The chart below gives a glimpse of this.

Source: REFINITIV, Analysis by Kalkine Group 

Risks associated with investment

The company’s financial performance is mostly dependent on the price of gold, which directly affects the company’s profitability, margins, and cash flows. The price of gold is subject to volatility. It is affected by various factors, such as the strength of the US dollar, Interest rates, Inflation rates, demand and supply, all of which are beyond the company’s control.

Financial overview of FY 2021 (in thousands of USD)

Source: Company Filing

• In FY 2021, the company reported higher revenues at USD 328.1 million against USD 242.7 million in the previous corresponding period. Significantly higher revenue in 2021 over 2020 was a result of the pandemic-related suspension of operations in Q2 2020 that was previously noted.
• Total cost of sales in the reported period increased to USD 223.8 million against USD 133.1 million in pcp. An increase was mainly due to higher production cost and higher depreciation expenses on the back of higher production.
• The company posted an operating profit of USD 91.8 million against USD 88.5 million in pcp.
• Net income in FY 2021, stood at USD 58.1 million compared to 63.4 million in pcp, supported by lower interest expenses and partially offset by higher income tax in the reported period.
  

Valuation Methodology (Illustrative): EV to EBITDA based Valuation Metrics

Analysis by Kalkine Group 

Stock recommendation

The company had another solid quarter, exceeding the high end of its production target for FY2021. The Pavon open pit deposit, which they developed and ramped up production to 1,000 tonnes per day of ore to the Libertad mill in 22 months, made a significant contribution. The group also offers a strong value proposition given that it has installed processing capacity of 2.7 million tonnes, of which about 70% is being used. Furthermore, Fiore Gold was acquired, giving a diverse asset base, immediate production, and substantial growth and development upside in Nevada, which is a critical plus.

Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 1.24 as on February 25, 2022.  Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on February 25, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Disclaimer

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