Victoria Gold
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Victoria Gold |
Eagle receives its final permit |
Final permit received |
Metals & mining |
17 December 2015 |
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Victoria Gold is a research client of Edison Investment Research Limited |
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Victoria Gold (VIT) has received the final (water) permit it requires to develop the Eagle Gold Project into a working mine, after a considerable two years of work for the company. Eagle is a shovel-ready, fully permitted, pre-financed gold project (ie all permits received with First Nation support in place), which has robust economics at current (and lower) gold prices. VIT is to complete further satellite deposit drilling with the aim of delineating new resources that will then refine Eagle’s production profile. VIT intends to publish a revised Eagle feasibility study by end 2016.
Year end |
Revenue (C$m) |
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 |
(2.0) |
(0.6) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
Interim results show end-August cash of C$12.9m
VIT’s interim financial statement indicates cash burn of C$962k per quarter and an end-August cash balance of C$12.9m. Adjusting for its H116 results, we estimate that VIT will finish FY16 with cash of c C$9.3m, which we anticipate will cover its FY17 work programme. However, VIT is currently finalising the scope and budgets for its FY17 work programmes, so we await this guidance to refine our cost profile for the company through FY17 and beyond.
2016 to see refined project data come through
VIT’s 2016 work programmes are likely to comprise drilling of a total 6,000m, spread equally across the Shamrock/Olive deposits. This drilling will aid delineation of new resources and new met testing potentially allowing for improved grades to bolster project economics in the first few years of Eagle’s production. Following completion of drilling and compilation and verification of all data, VIT will publish an updated feasibility study (FS), which we expect to show improvement over the already robust 5 April 2012 FS (see valuation section below for scenario).
Valuation: Solid with further upside via new NI43-101
We adjust our C$1.28 base case value for a US$/C$ FX rate of 0.73 (0.76 previously) and VIT’s H116 results. We retain our gold price forecasts as per our sector report Gold: The value of gold and other metals and use a 10% discount rate to reflect general equity risk. On this basis, our valuation increases 15% from C$1.28 to C$1.47 per share. At a flat gold price of US$1,000/oz, VIT’s base case valuation is C$0.47, a 213% premium to its current share price. Our upside valuation, which uses the aforementioned adjustments, but also factors in extra crushing capacity and raises the head grade in the early years of production (due to Olive ore being treated), is C$2.30 per share (C$2.04 previously). This latter scenario is our attempt to estimate the value uplift resulting from the forthcoming 2016 drill campaigns and updated Eagle FS due by end 2016.
Financial summary
Exhibit 1: Financial summary
C$'000s |
2013 |
2014 |
2015 |
2016e |
2017e |
||
Year-end 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 |
186 |
||
Profit Before Tax (norm) |
|
|
(2,345) |
(1,550) |
(1,665) |
(2,071) |
(1,967) |
Profit Before Tax (FRS 3) |
|
|
14,488 |
(3,353) |
(7,335) |
(2,171) |
(1,967) |
Tax |
(4,843) |
30 |
(118) |
0 |
0 |
||
Profit After Tax (norm) |
(8,663) |
(2,959) |
(916) |
(2,171) |
(1,967) |
||
Profit After Tax (FRS 3) |
9,645 |
(3,323) |
(7,453) |
(2,171) |
(1,967) |
||
Average Number of Shares Outstanding (m) |
339.7 |
340.1 |
340.1 |
340.1 |
340.1 |
||
EPS - normalised (c) |
|
|
(2.6) |
(0.9) |
(0.3) |
(0.6) |
(0.6) |
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) |
(0.6) |
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 |
117,680 |
Intangible Assets |
9,163 |
0 |
0 |
0 |
0 |
||
Tangible Assets |
100,853 |
112,949 |
114,903 |
117,680 |
117,680 |
||
Investments |
60 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
33,621 |
25,498 |
16,341 |
10,910 |
9,031 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
14,265 |
11,008 |
185 |
185 |
185 |
||
Cash |
12,489 |
14,175 |
14,752 |
9,321 |
7,442 |
||
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 |
121,708 |
119,741 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(8,946) |
(3,986) |
(2,859) |
(2,774) |
(2,065) |
Net Interest |
1,046 |
940 |
320 |
82 |
186 |
||
Tax |
4,097 |
(553) |
(798) |
0 |
0 |
||
Capex |
(3,587) |
4,428 |
3,459 |
(2,739) |
0 |
||
Acquisitions/disposals |
14 |
37 |
0 |
0 |
0 |
||
Financing |
107 |
821 |
454 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(7,269) |
1,687 |
577 |
(5,431) |
(1,879) |
||
Opening net debt/(cash) |
|
|
(19,664) |
(12,489) |
(14,175) |
(14,752) |
(9,321) |
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) |
(9,321) |
(7,442) |
Source: Edison Investment Research, company accounts. Note: Our base case Eagle capex assumptions run from 2017.
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