Orbis Gold Ore Zone December 2014

Transcription

1 . $0.32 $0.57 $0.89 Share Price $1.13 Positive Neutral Negative RECOMMENDATION: NEUTRAL (WAS SPECULATIVE BUY) Orbis was recently approached by Semafo with a proposed offer for the company of $A0.65. The proposed offer price is close to our current valuation, and whilst we would hope for a sweetener to potentially lift the offer to circa $A0.70, we do not feel there is sufficient premium left to retain our BUY recommendation. Accordingly, we reduce our recommendation to NEUTRAL. Trading Data Last Price $ month range $ $0.70 Market cap. $140m Free Float $102m (73%) Avg. daily volume 0.2M Avg. daily value $0.1m 12m return (historical) 124.0% Valuation (DCF - $ps) $0.71 Share Price History Emerging West Africa high grade play. Orbis offers two quality high grade projects in Burkina Faso (Natougou and Nabanga). One has already progressed to Bankable Feasibility stage (due for completion mid 2015), the other currently under scoping study (due for completion December 2014). Combined production is targeted in excess of 250k ounces, elevating the company to one of the more significant Australian listed gold companies. A grade tenement package. Orbis holds over 2,700km 2 exploration tenements. Very large licenses surround its two advanced projects, with over 1000km 2 surrounding a third project to the West of Burkina Faso (Bantou). The company recently acquired acreage in the Ivory Coast. 2.5 years to production? Management forecasts key project, Natougou, to come into production in CY17 (we have assumed CY18 for conservatism); with production peaking at over 200k ounces, and low all-in costs averaging $US634/oz. Execution and funding the key risks. There remains considerable risk associated with the group given the relatively early stage of the company s key projects. The company has a modest cash balance, and still requires full funding for the circa $240m project. The low cost nature of both advanced projects does partially mitigate these risks. Yearly Gold Production vs Cash Cost (k oz) ($/oz) 500 2, , , , E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E Nabanga Natougou All-in cash cost ($/oz) Gold Price (AUD) Source: EAP estimates, Company PAGE 1 OF 5

2 FINANCIAL SUMMARY Orbis Gold OBS As at: 1/12/2014 Recommendation: Neutral DCF Valuation $0.71 Year end Jun 2014A 2015E 2016E 2017E 2018E Year end Jun 2014A 2015E 2016E 2017E 2018E INCOME STATEMENT VALUATION METRICS Total Revenue $m PER x NM NM NM NM 1.3 Operating Costs $m (152) Dividend Yield % NM Royalty $m (38) P/FCF x NM NM Exploration W/off $m (3) (4) (4) (4) (4) ROA % -10% -2% -3% -3% 34% Total Op. Costs $m (3) (4) (4) (4) (194) ROE % -10% -3% -5% -6% 43% D&A $m (48) Net Debt to Equity % -14% -77% 8% 89% -25% Interest Exp. $m 0 (2) (9) (9) (9) Debt to Assets % 0% 45% 45% 45% 21% Corporate $m (3) (3) (3) (3) (4) Other $m Directors Total Costs $m (6) (9) (16) (16) (254) Chairman John Bovard Pre-Tax Profit $m (6) (8) (13) (15) 322 Managing Director Peter Spiers Tax Provision $m (96) Executive Director Nicholas Mather Net Profit $m (4) (6) (9) (11) 225 Executive Director Michele Muscillo Minorities $m Non-Executive Director Kevin Tomlinson Attrib Net Profit $m (4) (6) (9) (11) 225 Abnormal $m Substantial Shareholders % Reported profit $m (4) (6) (9) (11) 225 Greenstone Resources 16.0% Daguilar Gold Ltd 13.5% CASH FLOW 14A 15E 16E 17E 18E DGR Global 13.4% Operating Cashflow $m (3) (0) The Bank of Nova Scotia 9.1% -Capex $m (4) (4) (144) (132) (53) Tenstar Trading 6.7% -Exploration $m (9) (10) (10) (10) (10) Acorn Capital 4.8% Free Cashflow $m (15) (14) (145) (135) 328 -Dividends $m (48) Valuation Summary BEAR BASE BULL +Equity Raised $m $AM A$/share $AM A$/share $AM A$/share +Debt Drawdown $m Operations -Other $m Nabanga Net Change in Cash $m (4) 266 (145) (135) 280 Natougou Cash at End Period $m (8) 271 Exploration Sub Total BALANCE SHEET 14A 15E 16E 17E 18E Cash $m (8) 272 Financial Total Assets $m Forward sales Total Debt $m Cash* Total Liabilities $m Total Borrowings Shareholders Equity $m Corporate/Other Total Valuation (A$) Production 14A 15E 16E 17E 18E Natougou Ore Milled (k t) ,600 Head Grade - Au (g/t) Recovery - Au (%) 0.0% 0.0% 0.0% 0.0% 94.0% Reserves (100%) Tonnes Au Gold Production - Au (k oz) M g/t k oz Profit and Loss Cash Cost Total Attributable 0 Cash Cost ($/t) Cash Cost (A$/oz) Resources (100%) Tonnes Au Gold Total Cost (A$/oz) M g/t k oz Natougou ,000 Nabanga Nabanga Ore Milled ($/t) Admin/Gen ($/t) Total Attributable ,570 Recovery - Au (%) 0.0% 0.0% 0.0% 0.0% 85.0% Production - Au (k oz) Assumptions 14A 15E 16E 17E 18E Gold Price (US$/oz) 1,248 1,198 1,202 1,210 1,226 Profit and Loss Cash Cost Exch Rate (US$/A$) Cash Cost ($/t) Gold Price (A$/oz) 1,337 1,365 1,423 1,449 1,467 Cash Cost (A$/oz) Total Cost (A$/oz) GROUP ATTRIBUTABLE Gold Production (k oz) Cash Cost (A$/oz All-in Cost (A$/oz Source: Company data, E&P Research estimates Valuation fully diluted to assume 50% equity funding, with the equity component added to the cash balance. Bear assumes 15% grade dilution and 15% higher operating costs. Bull assumes a 2 year extension to mine life. PAGE 2 OF 5

3 Positive Neutral Negative Speculative Buy Suspended Not Rated Stock is expected to outperform the S&P/ASX 200 over the coming 24 months Stock expected to perform in line with the S&P/ASX 200 over the coming 24 months Stock is expected to underperform the S&P/ASX 200 over the coming 24 months Stock has limited history from which to derive a fundamental investment view or its prospects are highly dependent on event risk, eg. Successful exploration, scientific breakthrough, high commodity prices, regulatory change, etc. Stock is temporarily suspended due to compliance with applicable regulatory and/or Evans & Partners policies in circumstances where Evans & Partners is acting in an advisory capacity. Stock is not included in our investment research universe. Research Criteria Definitions Recommendations are primarily determined with reference to how a stock ranks relative to the S&P/ASX 200 on the following criteria: Valuation Earnings Outlook Earnings Momentum Shareholder Returns Rolling 12 month prospective multiples (composite of Price-to-Earnings Ratio, Dividend Yield and EV/EBITDA), or long-term NPV for resource stocks. Forecast 2 year EPS growth. Percentage change in the current consensus EPS estimate for the stock (rolling 1 year forward basis) over the consensus EPS estimate for the stock 3 months ago. Composite of forecast ROE (rolling 1 year forward basis) and the percentage change in ROE over 2 years. Debt Servicing Capacity Rolling 12 month EBIT Interest Cover ratio. Cyclical Risk Industry Quality Qualitative assessment of the 2 year outlook for a stock/industry s profit cycle. Qualitative assessment of an industry s growth/returns potential and company specific management capability. Financial Transparency If we don t understand it, we won t recommend it. For stocks where Evans & Partners does not generate its own forecasts, Bloomberg consensus data is used. Analysts can introduce other factors when determining their recommendation, with any material factors stated in the written research where appropriate. PAGE 3 OF 5

4 This document is provided by Evans and Partners ABN , holder of AFSL The information is general advice only and does not take into consideration an investor s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor s objectives, financial situation and needs. If the advice relates to a financial product that is the subject of a Product Disclosure Statement (e.g. unlisted managed funds) investors should obtain the PDS and consider it before making any decision about whether to acquire the product. The material contained in this document is for information purposes only and does not constitute an offer, solicitation or recommendation with respect to the purchase or sale of securities. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Investors should be aware that past performance is not an infallible indicator of future performance and future returns are not guaranteed. Any opinions and/or recommendations expressed in this material are subject to change without notice and Evans and Partners is not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Evans and Partners. Evans and Partners and its respective officers and associates may have an interest in the securities or derivatives of any entities referred to in this material. Evans and Partners does, and seeks to do, business with companies that are the subject of its research reports. This report was prepared solely by Evans and Partners Pty Ltd. ASX did not prepare any part of the report and has not contributed in any way to its content. The role of ASX in relation to the preparation of this research report is limited to funding its preparation by Evans and Partners Pty Ltd in accordance with the ASX Equity Research Scheme. ASX does not provide financial product advice. The views expressed in this research report may not necessarily reflect the views of ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of this research report. ANI ASH AUI BENPC CGL DUI EGI HSO IDR IMF, IMFHA MBLPA MPL MQG NAB PGH PNC REG SAR SPO SWM The Issuer has appointed Evans and Partners as Broker to an on-market buy-back. Accordingly, Evans and Partners is unable to give Sellers advice in respect to a sale of this security. The Issuer has appointed Evans and Partners as Broker to an on-market buy-back. Accordingly, Evans and Partners is unable to give Sellers advice in respect to a sale of this security. Evans and Partners has been appointed as Placement Agent in respect of the company s renounceable rights issue and will receive fees for acting in this capacity. A director of Evans and Partners Pty Ltd is a director of Macquarie Group Limited. A director of Evans and Partners Pty Ltd is a director of Seven West Media Limited. I, Cathy Moises, hereby certify that all the views expressed in this report accurately reflect my personal views about the subject investment theme and/or company securities. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. I, Cathy Moises, and/or entities in which I have a pecuniary interest, have an exposure to the following securities and/or managed products: RED, MDL, TIG, OZL. PAGE 4 OF 5

5 Except for any liability which cannot be excluded, Evans and Partners, its directors, employees and agents accept no liability or responsibility whatsoever for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. All information is correct at the time of publication; additional information may be available upon request. PAGE 5 OF 5