Mandalay Resources Corp. (TSX: MND) is a Canadian-based natural resource Corporation with producing assets in Australia and Sweden, and care and maintenance and development projects in Chile and Canada.

Key highlights

• Robust production figures for FY 2021: The company exceeded its full-year 2021 production guidance with a consolidated saleable gold equivalent production of 123,002 ounces – highest total since 2017, which is a significant plus. Furthermore, on the back of exploration success at Björkdal mine, finding higher grades at depth to north-east gave confidence to the management and shared higher production guidance for FY 2022, where it expects the gold production in a range of 118,000 – 130,000 AuEq oz.

• Solid Quarterly Performance: The company's financial performance during the fourth quarter of 2021 was excellent. The firm achieved USD 72.9 million in consolidated sales and USD 40.6 million in adjusted EBITDA and adjusted net income of USD 21.9 million. Additionally, this was the company's eight consecutive profitable quarter.

Source: Company Presentation

• Trading at discounted valuations: The company’s shares are available at an NTM EV/EBITDA multiple of 2.2x compared to the sector (Basic Material) median of 4.7x. while on NTM Price to Cash Flow multiple the stock is trading at 2.5x compared to 4.6x. This implies that the shares are trading at deep discount against the sector. The stock is undervalued on multiple valuation parameters. The table below reflects the picture.

    Source: REFINITIV, Analysis by Kalkine Group 

Risks associated with investment 

The company’s business model is exposed to a variety of risks ranging from a sharp plunge in the underlying commodity prices, forex risks etc. The resurgence of COVID-19 cases could disrupt exploration and production, which would affect financial performance.

Financial overview of FY 2021 (Expressed in U.S. dollars)

Source: Company Filing 

• In FY 2021, the company posted higher revenue at USD 229.3 million compared to USD 178.9 million in the previous corresponding period. An increase in revenue was the result of a 26% increase in gold equivalent ounces sold and the support from higher realized metal prices.
• Income from the mining operations increased to USD 82.1 million against USD 64.3 million in pcp, primarily due to higher revenue.
• Adjusted EBITDA stood at USD 115.0 million compared to USD 94.2 million in FY 2020.
• The firm lowered it finance cost to USD 8.7 million against USD 16.3 million in pcp.
• The company reported consolidated net income of USD 54.8 million against USD 9.3 million in pcp.
  

Valuation Methodology (Illustrative): EV to EBITDA

Analysis by Kalkine Group 

Stock recommendation

The company's great performance in this quarter and for the whole year 2021 give more confirmation of its strategy's effectiveness. In 2021, it accomplished important financial milestones, including a 28% year-over-year increase in sales to a new high of USD 229.4 million at year's conclusion, with over USD 18 million in free cash flow. Furthermore, the Company is presently in a solid financial position with a strong balance sheet, and it plans to maintain this momentum in FY 2022 by increasing output and improving cash flows. Therefore, based on the above rationales and valuation, we recommend a “Hold” rating at the closing price of CAD 2.89 as on March 02, 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 Price Chart (as on March 02, 2022). Source: REFINITIV, Analysis by Kalkine Group

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.