Euromax Resources
Euromax Resources |
Definitive feasibility study results |
Results of DFS |
Metals & mining |
7 January 2016 |
Share price performance
Business description
Next events
Analyst
Euromax ResourcesEuromax Resources is a research client of Edison Investment Research Limited |
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On 6 January, Euromax released the results of its feasibility study on its 100%-owned Ilovica gold-copper porphyry project, conducted by Amec Foster Wheeler, Tetra Tech, DMT, Golder Associates and Schlumberger, amongst others. While reported pre-tax and post-tax NPVs (using a 5% discount rate) are lower than the corresponding figures in 2014’s pre-feasibility study (PFS), at US$513.0m and US$440.1m (vs US$675m and US$558m) respectively, the corresponding internal rates of return are higher, at 19.8% and 17.8% (vs 18.6% and 16.5%). This is as a result of lower initial capex (US$474.3m vs US$501.8m, including contingency) and the more efficient phasing of cash flows. The result is indicative of a more efficient project in capital terms, which is likely to manifest itself in lower future dilution to equity holders, and comes despite the definitive feasibility study using lower long-term metal prices of US$1,220/oz Au and US$2.90/lb Cu (vs US$1,250/oz and US$3.00/lb in the PFS).
Year end |
Revenue (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
0.0 |
(5.4) |
(6.6) |
0.0 |
N/A |
N/A |
12/14 |
2.7 |
(6.6) |
(7.8) |
0.0 |
N/A |
N/A |
12/15e |
3.7 |
(8.6) |
(7.4) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(8.8) |
(2.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Proven reserves and measured resources multiply
Overall, the major operating parameters of the project, such as annual throughput (10Mtpa) and mine life (20 years vs 23 years), remained little changed compared with the PFS. Within resources, however, 99.3Mt of indicated material was upgraded into the measured category, which increased 8.7-fold (or 1.5Moz Au) as a result. Similarly, all of the sulphide ore’s reserves (and more) were upgraded from the ‘probable’ category into ‘proven’, thereby increasing geological confidence and reducing risk concomitantly. Significantly, World Gold Council-defined adjusted operating cash costs are estimated to be US$200/oz and all-in costs to be US$372/oz (after Cu credits), which should put Ilovica well within the industry’s lowest-cost quartile. The base date for prices in the feasibility study is September 2015, with opex costs estimated to an accuracy of 10% (vs 25% for the PFS).
Valuation: Developer for the price of an explorer
In the December edition of Edison Insight, we estimated the life-of-mine dividend stream to investors to be C$0.95/share, fully diluted, at a share price of C$0.35 and a forex rate of C$1.3012/US$. This reduces to C$0.83 at the current share price and forex rate, but will be updated once the full DFS is released. In the meantime, the DFS’s post-tax NPV5 of US$440.1m equates to US$3.77 (C$5.31) per existing Euromax share (ie undiluted), while its enterprise value equates to less than US$4.64 per gold equivalent resource ounce (excluding Inferred resources) – ratings comparable to costs of discovery, rather than a company in the final stages of permitting.
Exhibit 1: Financial summary
C$'000s |
2011 |
2012 |
2013 |
2014 |
2015e |
2016e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
0 |
0 |
0 |
2,695 |
3,663 |
0 |
Cost of Sales |
0 |
0 |
0 |
(2,251) |
(3,018) |
0 |
||
Gross Profit |
0 |
0 |
0 |
444 |
645 |
0 |
||
EBITDA |
|
|
(2,521) |
(4,973) |
(5,276) |
(6,366) |
(7,944) |
(8,589) |
Operating Profit (before amort. and except.) |
(2,611) |
(5,056) |
(5,375) |
(6,492) |
(8,121) |
(8,766) |
||
Intangible Amortisation |
0 |
0 |
0 |
(21) |
(8) |
0 |
||
Exceptionals |
(40) |
59 |
(1,806) |
(4,186) |
(1,979) |
0 |
||
Other* |
(835) |
(428) |
(835) |
4 |
12 |
0 |
||
Operating Profit |
(3,485) |
(5,425) |
(8,015) |
(10,695) |
(10,096) |
(8,766) |
||
Net Interest |
0 |
0 |
(17) |
(127) |
(524) |
15 |
||
Profit Before Tax (norm) |
|
|
(2,611) |
(5,056) |
(5,392) |
(6,619) |
(8,645) |
(8,752) |
Profit Before Tax (FRS 3) |
|
|
(3,485) |
(5,425) |
(8,033) |
(10,822) |
(10,620) |
(8,752) |
Tax |
0 |
(33) |
(30) |
(25) |
(27) |
0 |
||
Profit After Tax (norm) |
(2,514) |
(4,947) |
(5,414) |
(6,640) |
(8,660) |
(8,752) |
||
Profit After Tax (FRS 3) |
(3,485) |
(5,458) |
(8,063) |
(10,847) |
(10,647) |
(8,752) |
||
Average Number of Shares Outstanding (m) |
48.0 |
63.4 |
82.6 |
85.3 |
116.8 |
351.7 |
||
EPS - normalised (c) |
|
|
(5.2) |
(7.8) |
(6.6) |
(7.8) |
(7.4) |
(2.5) |
EPS - (IFRS) (c) |
|
|
(7.3) |
(8.6) |
(9.8) |
(12.7) |
(9.1) |
(2.5) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
#DIV/0! |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
#DIV/0! |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
#DIV/0! |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
11,929 |
17,084 |
18,015 |
16,641 |
26,293 |
26,115 |
Intangible Assets |
0 |
0 |
29 |
430 |
422 |
422 |
||
Tangible Assets |
11,929 |
17,084 |
17,985 |
16,211 |
25,871 |
25,693 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
2,798 |
3,341 |
6,290 |
3,180 |
3,281 |
145,926 |
Stocks |
0 |
0 |
0 |
0 |
305 |
0 |
||
Debtors |
776 |
1,579 |
608 |
199 |
301 |
0 |
||
Cash |
2,022 |
1,762 |
1,335 |
2,110 |
1,804 |
145,055 |
||
Other |
0 |
0 |
4,346 |
871 |
871 |
871 |
||
Current Liabilities |
|
|
(530) |
(749) |
(1,208) |
(5,831) |
(7,790) |
(7,542) |
Creditors |
(530) |
(749) |
(1,208) |
(4,996) |
(6,955) |
(6,707) |
||
Short term borrowings |
0 |
0 |
0 |
(835) |
(835) |
(835) |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
(10,568) |
(21,135) |
Long term borrowings |
0 |
0 |
0 |
0 |
(10,568) |
(21,135) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
14,198 |
19,675 |
23,096 |
13,990 |
11,216 |
143,364 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(1,966) |
(5,178) |
(4,496) |
(2,494) |
(6,904) |
(8,217) |
Net Interest |
0 |
0 |
(17) |
(18) |
0 |
0 |
||
Tax |
0 |
0 |
(35) |
(26) |
(27) |
0 |
||
Capex |
(5,245) |
(6,947) |
(5,047) |
(2,122) |
(11,816) |
0 |
||
Acquisitions/disposals |
0 |
1,468 |
1,041 |
3,023 |
0 |
0 |
||
Financing |
7,907 |
10,479 |
7,961 |
(74) |
7,874 |
140,900 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
696 |
(178) |
(594) |
(1,711) |
(10,873) |
132,683 |
||
Opening net debt/(cash)** |
|
|
(1,253) |
(2,022) |
(1,762) |
(1,406) |
(1,275) |
9,598 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
73 |
(83) |
167 |
1,580 |
0 |
0 |
||
Closing net debt/(cash)** |
|
|
(2,022) |
(1,762) |
(1,335) |
(1,275) |
9,598 |
(123,085) |
Source: Company sources, Edison Investment Research. Note: Closing net debt/(cash) includes ‘restricted cash’ from FY14.
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