Victoria Gold
Written by
Victoria Gold |
Drilling underway, consultants appointed |
Feasibility study to be updated |
Metals & mining |
7 April 2016 |
Share price performance
Business description
Next event
Analysts
Victoria Gold is a research client of Edison Investment Research Limited |
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Victoria Gold has appointed consultants and project engineers to update its 2012 Eagle feasibility study (FS). The results are due to be included in a new FS, expected during Q316. The update will also include new drilling results being completed over the potential satellite ore feed deposits of Shamrock and Olive, both situated within 5km of the future Eagle plant. This 8,000m drill programme will run to mid-/end-June. Both the FS update and drill programmes are fully funded.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
02/14 |
0.0 |
(1.6) |
(0.9) |
0.0 |
N/A |
N/A |
02/15 |
0.0 |
(1.7) |
(0.3) |
0.0 |
N/A |
N/A |
02/16e |
0.0 |
(2.1) |
(0.6) |
0.0 |
N/A |
N/A |
02/17e |
0.0 |
(1.9) |
(0.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Move to update FS driven by market conditions
Victoria Gold’s Eagle Gold project is fully permitted and, effectively, ready for development. However, as with many other mining companies, rather than attempting project financing in the current market, Victoria Gold has decided to manage its cash resources and bolster project economics through adding higher-grade satellite ore deposits situated within 5km of the planned Eagle mine site – close enough to easily truck ore to heap leach pads.
Updated FS to include new project data
The company anticipates the main driver for value growth at Eagle will be through adding satellite pits at Shamrock and Olive. A second heap-leach pad is also envisaged, allowing for greater grade control with highest grades (likely from Eagle and Olive) treated on the Eagle pad, and lower grade run-of-mine material blended and treated on a second ‘low-grade’ pad. The FS announced in 2012 used C$/US$ forex rates with oil and equipment prices as of Q411, all much higher than today.
Valuation: Current share price limits dilution
Our current base case valuation is for Eagle only and is based solely on the 2012 Eagle FS. On this basis, and using our in-house gold price deck, we value Victoria’s shares at C$1.39 (using a 10% discount rate). For illustration, assuming Victoria undertakes a 50/50 debt/equity financing strategy to raise the then projected C$430m in capex, at a share price of C$0.28, this yields a diluted valuation of C$0.71 per share (C$0.51 at US$1,220/oz Au). Both undiluted and diluted valuations are 396% and 154% respectively above Victoria’s current share price of C$0.28. Note that these valuations are based on pre-optimised outdated feasibility study results and could increase as a result of new lower oil and equipment costs being used.
Exhibit 1: Financial summary
C$'000s |
2013 |
2014 |
2015 |
2016e |
2017e |
||
28-February |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
15,796 |
(2,779) |
(8,522) |
(2,146) |
(2,146) |
||
Gross Profit |
15,796 |
(2,779) |
(8,522) |
(2,146) |
(2,146) |
||
EBITDA |
|
|
(3,391) |
(2,491) |
(1,985) |
(2,146) |
(2,146) |
Operating Profit (before amort. and except.) |
(3,391) |
(2,491) |
(1,985) |
(2,153) |
(2,153) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
18,308 |
(364) |
(6,537) |
0 |
0 |
||
Other |
(1,475) |
(1,438) |
867 |
(100) |
0 |
||
Operating Profit |
13,442 |
(4,293) |
(7,655) |
(2,253) |
(2,153) |
||
Net Interest |
1,046 |
940 |
320 |
82 |
259 |
||
Profit Before Tax (norm) |
|
|
(2,345) |
(1,550) |
(1,665) |
(2,071) |
(1,895) |
Profit Before Tax (FRS 3) |
|
|
14,488 |
(3,353) |
(7,335) |
(2,171) |
(1,895) |
Tax |
(4,843) |
30 |
(118) |
0 |
0 |
||
Profit After Tax (norm) |
(8,663) |
(2,959) |
(916) |
(2,171) |
(1,895) |
||
Profit After Tax (FRS 3) |
9,645 |
(3,323) |
(7,453) |
(2,171) |
(1,895) |
||
Average Number of Shares Outstanding (m) |
339.7 |
340.1 |
340.1 |
353.9 |
361.1 |
||
EPS - normalised (c) |
|
|
(2.6) |
(0.9) |
(0.3) |
(0.6) |
(0.5) |
EPS - normalised and fully diluted (c) |
|
(1.2) |
(0.4) |
(0.1) |
(0.3) |
(0.3) |
|
EPS - (IFRS) (c) |
|
|
2.8 |
(1.0) |
(2.2) |
(0.6) |
(0.5) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
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 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
110,076 |
112,949 |
114,903 |
117,680 |
121,280 |
Intangible Assets |
9,163 |
0 |
0 |
0 |
0 |
||
Tangible Assets |
100,853 |
112,949 |
114,903 |
117,680 |
121,280 |
||
Investments |
60 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
33,621 |
25,498 |
16,341 |
14,518 |
9,111 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
14,265 |
11,008 |
185 |
185 |
185 |
||
Cash |
12,489 |
14,175 |
14,752 |
12,928 |
7,521 |
||
Other |
6,867 |
315 |
1,404 |
1,404 |
1,404 |
||
Current Liabilities |
|
|
(6,087) |
(3,908) |
(4,260) |
(4,084) |
(4,172) |
Creditors |
(6,087) |
(3,908) |
(4,260) |
(4,084) |
(4,172) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(4,616) |
(3,784) |
(2,798) |
(2,798) |
(2,798) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(4,616) |
(3,784) |
(2,798) |
(2,798) |
(2,798) |
||
Net Assets |
|
|
132,994 |
130,755 |
124,185 |
125,315 |
123,420 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(8,946) |
(3,986) |
(2,859) |
(2,774) |
(2,065) |
Net Interest |
1,046 |
940 |
320 |
82 |
259 |
||
Tax |
4,097 |
(553) |
(798) |
0 |
0 |
||
Capex |
(3,587) |
4,428 |
3,459 |
(2,739) |
(3,600) |
||
Acquisitions/disposals |
14 |
37 |
0 |
0 |
0 |
||
Financing |
107 |
821 |
454 |
3,607 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(7,269) |
1,687 |
577 |
(1,824) |
(5,407) |
||
Opening net debt/(cash) |
|
|
(19,664) |
(12,489) |
(14,175) |
(14,752) |
(12,928) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
94 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(12,489) |
(14,175) |
(14,752) |
(12,928) |
(7,521) |
Source: Company accounts, Edison Investment Research
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