Ann: Mungari mine life extended to 15 years, page-10

Yesterday Jarden lifted its 12-month price target on EVN to $3.12, from $3.00 per share.

With a couple of laggards in its portfolio, could EVN take advantage of rising gold prices to capture a bit of value from its lower performing mines?

That apparently is the question being asked by Jarden analysts Jon Bishop, Ben Lyons and Adam Bennett ahead of the miner’s quarterly results.

Jarden’s number-crunchers view Mungari as ‘non-core’.

“Whilst the exploration is exciting, we do not consider the operating intensity a logical long-term fit for EVN’s business and growth aspirations,” they said.

“We acknowledge the economies of scale benefits in terms of growing the economic inventory base but we remain cautious regarding the level of management time to aggregate the various ore sources, all the while preserving margin.

“We value the asset at $835m – on par with Red Lake but a distant fourth to Ernest Henry, Cowal and Northparkes in that order – realiseable value that could materially retire debt and free-up capacity to focus on the longer life, higher margin assets in the portfolio.

“Copper contribution would rise from c30% to nearly 45% of our total forecast revenues.”

With gold close to US$2,300/oz that is well above Jarden’s long-term spot gold forecast of US$1700/oz, with copper passing US$9,000/t yesterday as well, way beyond the advisory firm’s US$3.50/lb long term mark.

If these spot prices hold firm for just 24 months, it will mean a lift in earnings per share for EVN from 19.7c to 22.7c in FY2024 and 29.2c to 35.8c on Jarden’s numbers in FY25 (consensus 34.9c). FY26 would see that fall back to 20.9c, though consensus is brighter at 33.1cps.

Operating EBITDA would peak at $1.78b in 2025, more than double 2023 levels.

It would paper over the cracks of a guidance Jarden says appears ‘stretched’.

Despite a big miss at Red Lake, EVN maintained its plan to hit the lower end of a forecast 789,000oz +-5% (750,000oz at the low range) in FY24.

Jarden’s analysts say a 470,000oz runrate in the June half looks difficult, projecting that it would need to produce at an equivalent of 1Mozpa through the last three months of the year.

They think EVN will more likely deliver 720,000oz in this financial year.

“However, we suspect that at commodity prices nearing A$3,500/oz gold and US$4/lb copper, any guidance miss will likely be taken in the market’s stride,” they said.

“Further, if this translates to margin and FCF to reduce gearing levels, we expect the market will likely look to EVN with renewed optimism. At spot prices maintained over the next 24 months, we estimate that net debt would fall to $1.2Bn or 40% Debt:Equity (26% ND:ND+E) from 43% and 32%, respectively.”

Jarden expects to see average gold prices of US$2112/oz through the second half of the financial year.

Cheers

These are only my thoughts and it does not constitute investment advice. Before acting on any information you read and before making any financial or investment decisions, you should always consult your advisor(s) or other relevant professional experts.