Equinox Gold Corp.

Decent Financial Position and Ample Liquidity: Equinox Gold Corp. (TSX: EQX) is a Canadian mining company with a portfolio of production, near-production, and exploration-stage projects. As on 5 August 2020, the market capitalization of the company stood at ~CAD 3.96 billion.

Quarterly Performance (For the Period Ended 31 March 2020): Equinox Gold Corp reported a strong first quarter lifted by the production from its recently acquired assets. Despite the challenges related to the COVID-19 pandemic, the company achieved record gold production of 89,000 ounces and reported record earnings of USD 43.2 million from mine operations. During the quarter, the company sold 82,629 oz of gold and reported revenue of USD 130 million. In the same time span, EBITDA of the company stood at USD 65.3 million. Equinox Gold retains a strong financial position and is fully funded for its organic growth plans with a cash balance of USD 480 million.

Quarterly Financial Highlights (Source: Company Reports)

Key Risks: EQX has evaluated various risks at each operation and has implemented business continuity protocols to operate efficiently. The uncertainties from the COVID-19 crisis and other factors may cause actual results and developments to differ from those expressed or implied. EQX is also susceptible to operational risks and hazards inherent with the business of mining.

Valuation Methodology: EV/Sales Multiple Based Relative valuation (Illustrative)

EV/Sales Multiple Based Relative Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company has given a proactive response to the COVID-19 pandemic and has experienced minimal disruption. EQX is focused on achieving its growth objectives and is in a strong financial position. The company is likely to announce its results for the second quarter on 10 August 2020. The stock of EQX gave a return of 27.95% in the past three months and a return of 8.41% in the last one month. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target upside of lower double-digit (in percentage terms). The stock is trading close to its 52-week low of CAD 16.75 and holds the potential for growth as depicted by the EV/Sales multiple based valuation. Considering the current trading levels, attractive returns in the past three months, decent financial performance and record quarterly production despite the pandemic, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 16.53, up by 1.7231% on 05 August 2020.

EQX Daily Technical Chart (Refinitiv, Thomson Reuters)

Centerra Gold Inc.

Healthy Cash Flow Position: Centerra Gold Inc. (TSX: CG) is a gold mining and exploration company engaged in the operation, exploration, development, and acquisition of gold properties in Asia, North America, and other markets worldwide. As on 5 August 2020, the market capitalization of the company stood at ~CAD 5.64 billion.

Quarterly Performance (For the Period Ended 30 June 2020): During the second quarter ended June 2020, the company produced 219,692 ounces of gold and 19.1 million pounds of copper at production costs per ounce of gold sold of USD 410 per ounce and production costs per pound of copper sold of USD 1.20 per pound. In the same time span, All-in sustaining costs on a by-product basis per ounce sold stood at USD 804 per ounce. During the quarter, the company generated USD 268.1 million from cash flow from operations and reported net earnings of USD 80.7 million. The company ended the quarter in a healthy position with total liquidity of USD 712 million and cash balance of USD 212 million. CG has increased its quarterly dividend by 25% to CAD 0.05 per common share. CG has expanded its exploration program for 2020 wherein it is primarily focused on brownfield exploration at Kumtor, Mount Milligan and Öksüt.

Quarterly Financial and Operational Highlights (Source: Company Reports)

Key Risks: The company is exposed to a variety of risks including potential impacts of COVID-19 on operations; delay in planned exploration activities; the achievement of 2020 guidance and the Company’s expectations; the Company’s expectations regarding having sufficient liquidity and accessing water at its Mount Milligan Mine and its plans for a longer-term solution.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company continued to witness strong operating performance at Kumtor and Mount Milligan and achieved commercial production at Öksüt Mine. The company retains a healthy balance sheet with no debt and ample liquidity. As per TSX, the stock of CG is trading close to its 52-weeks’ high level of CAD 19.23 but retains further potential for growth. The stock of CG gave a return of 45.05% in the past three months and a return of 22.7% in the last one month. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target upside of lower double-digit (in percentage terms). Considering the current trading levels, attractive returns in the past three months, improvement in financial and operational performance despite the softer market conditions, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 19.16, up by 5.5056% on 5 August 2020.

CG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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.