Euromax Resources
Euromax Resources |
TSX listing approval |
Main board listing approval |
Metals & mining |
21 June 2016 |
Share price performance
Business description
Next events
Analyst
Euromax Resources is a research client of Edison Investment Research Limited |
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Since our last update note, Euromax has announced a number of developments that represent a systematic de-risking of the Ilovica project, including 1) the first tranche of convertible debt funding by CCC and similar financing by the EBRD; 2) submission of the EIA to the Macedonian Ministry of Environment as the first step for its international ESIA; 3) German government confirmation of UFK eligibility for the debt financiers of Ilovica; and finally, yesterday 4) approval to move to the main board of the TSX.
Year end |
Revenue (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
2.7 |
(6.6) |
(7.8) |
0.0 |
N/A |
N/A |
12/15 |
4.7 |
(8.4) |
(7.2) |
0.0 |
N/A |
N/A |
12/16e |
0.1 |
(6.7) |
(2.7) |
0.0 |
N/A |
N/A |
12/17e |
0.0 |
(37.5) |
(10.0) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Funding and Environmental Impact Assessment (EIA)
While superficially a convertible debt funding with both the EBRD and CCC (Consolidated Contractors Company), a conversion price of C$0.40/share in both cases is both in the money currently and self-evidently designed to convert into equity. In the meantime, Euromax’s EIA submission is effectively a draft international Environmental and Social Impact Assessment (ESIA), which is also required to go through the local Macedonian process. The details of the main mining project have already been the subject of a fairly extensive consultation process with the Macedonian government. The formal permit application process will begin on 24 July, after which the government has 60 days to raise any remaining issues before a construction permit is granted.
UFK eligibility and TSX promotion
The German government’s confirmation of UFK eligibility followed a formal application by UniCredit Bank in its capacity as UFK agent for the project finance facility. It is significant in that application implicitly demonstrates due diligence on the project having been accepted by all parties involved. Finally, approval to move up to the main board of the TSX (from the TSX Venture Exchange) should enhance the company’s credibility in the Canadian market, its access to funding and the liquidity of its shares.
Valuation: C$1.05 per share
In our April update note, we valued Euromax at C$1.03/share (based on the present value of the fully diluted potential dividend stream to Euromax investors discounted at 10% pa) to reflect the results of its definitive feasibility study on Ilovica. This remains substantially unchanged in the wake of yesterday’s announcement. Our updated valuation of C$1.05/share is solely occasioned by a change in FX rates, although it does so in conjunction with a self-evident reduction in risk. In the meantime, we estimate that the Ilovica resource alone has a value in the range US$52.0-78.8m cf Euromax’s market capitalisation of c US$50m.
Exhibit 1: Financial summary
C$'000s |
2011 |
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
0 |
0 |
0 |
2,695 |
4,729 |
96 |
0 |
Cost of Sales |
0 |
0 |
0 |
(2,251) |
(4,005) |
(80) |
0 |
||
Gross Profit |
0 |
0 |
0 |
444 |
724 |
16 |
0 |
||
EBITDA |
|
|
(2,521) |
(4,973) |
(5,276) |
(6,366) |
(7,749) |
(6,541) |
(7,184) |
Operating Profit (before amort. and except.) |
(2,611) |
(5,056) |
(5,375) |
(6,492) |
(7,917) |
(6,709) |
(39,555) |
||
Intangible Amortisation |
0 |
0 |
0 |
(21) |
(19) |
(11) |
0 |
||
Exceptionals |
(40) |
59 |
(1,806) |
(4,186) |
(1,979) |
0 |
0 |
||
Other* |
(835) |
(428) |
(835) |
4 |
24 |
0 |
0 |
||
Operating Profit |
(3,485) |
(5,425) |
(8,015) |
(10,695) |
(9,891) |
(6,720) |
(39,555) |
||
Net Interest |
0 |
0 |
(17) |
(127) |
(434) |
52 |
2,058 |
||
Profit Before Tax (norm) |
|
|
(2,611) |
(5,056) |
(5,392) |
(6,619) |
(8,351) |
(6,657) |
(37,497) |
Profit Before Tax (FRS 3) |
|
|
(3,485) |
(5,425) |
(8,033) |
(10,822) |
(10,325) |
(6,668) |
(37,497) |
Tax |
0 |
(33) |
(30) |
(25) |
(47) |
(13) |
0 |
||
Profit After Tax (norm) |
(2,514) |
(4,947) |
(5,414) |
(6,640) |
(8,374) |
(6,670) |
(37,497) |
||
Profit After Tax (FRS 3) |
(3,485) |
(5,458) |
(8,063) |
(10,847) |
(10,372) |
(6,681) |
(37,497) |
||
Average Number of Shares Outstanding (m) |
48.0 |
63.4 |
82.6 |
85.3 |
115.8 |
245.0 |
373.1 |
||
EPS - normalised (c) |
|
|
(5.2) |
(7.8) |
(6.6) |
(7.8) |
(7.2) |
(2.7) |
(10.0) |
EPS - normalised and fully diluted (c) |
|
(4.5) |
(6.7) |
(5.8) |
(5.7) |
(5.4) |
(2.4) |
(9.1) |
|
EPS - (IFRS) (c) |
|
|
(7.3) |
(8.6) |
(9.8) |
(12.7) |
(8.9) |
(2.7) |
(10.0) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
16.7 |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
11,929 |
17,084 |
18,015 |
16,641 |
29,696 |
29,517 |
319,174 |
Intangible Assets |
0 |
0 |
29 |
430 |
514 |
503 |
503 |
||
Tangible Assets |
11,929 |
17,084 |
17,985 |
16,211 |
29,182 |
29,014 |
318,671 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
2,798 |
3,341 |
6,290 |
3,180 |
4,871 |
137,535 |
18,079 |
Stocks |
0 |
0 |
0 |
0 |
0 |
8 |
0 |
||
Debtors |
776 |
1,579 |
608 |
199 |
1,056 |
8 |
0 |
||
Cash |
2,022 |
1,762 |
1,335 |
2,110 |
3,478 |
137,182 |
17,742 |
||
Other |
0 |
0 |
4,346 |
871 |
337 |
337 |
337 |
||
Current Liabilities |
|
|
(530) |
(749) |
(1,208) |
(5,831) |
(5,443) |
(5,911) |
(8,602) |
Creditors |
(530) |
(749) |
(1,208) |
(4,996) |
(5,443) |
(5,911) |
(8,602) |
||
Short term borrowings |
0 |
0 |
0 |
(835) |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
(15,596) |
(26,164) |
(231,172) |
Long term borrowings |
0 |
0 |
0 |
0 |
(15,596) |
(26,164) |
(231,172) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
14,198 |
19,675 |
23,096 |
13,990 |
13,528 |
134,977 |
97,480 |
CASH FLOW |
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Operating Cash Flow |
|
|
(1,966) |
(5,178) |
(4,496) |
(2,494) |
(5,765) |
(4,981) |
(2,420) |
Net Interest |
0 |
0 |
(17) |
(18) |
(144) |
0 |
0 |
||
Tax |
0 |
0 |
(35) |
(26) |
(93) |
(13) |
0 |
||
Capex |
(5,245) |
(6,947) |
(5,047) |
(2,122) |
(12,956) |
0 |
(322,028) |
||
Acquisitions/disposals |
0 |
1,468 |
1,041 |
3,023 |
705 |
0 |
0 |
||
Financing |
7,907 |
10,479 |
7,961 |
(74) |
5,255 |
128,130 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
696 |
(178) |
(594) |
(1,711) |
(12,998) |
123,136 |
(324,447) |
||
Opening net debt/(cash)* |
|
|
(1,253) |
(2,022) |
(1,762) |
(1,406) |
(1,275) |
12,118 |
(111,018) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
73 |
(83) |
167 |
1,580 |
(395) |
0 |
0 |
||
Closing net debt/(cash)* |
|
|
(2,022) |
(1,762) |
(1,335) |
(1,275) |
12,118 |
(111,018) |
213,429 |
Source: Company sources, Edison Investment Research. Note: *Net debt/(cash) includes ‘restricted cash’ from FY14.
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