Thanks for the comments J. Always good quality and thought...

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mainholm

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09/11/15

15:24

Post #: 16354188
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Originally posted by JID ↑

Hi Mainholm and Loki,

I have a slightly different take on things than Loki but respect his views as he is often right !!

My preference, after years of investing in this space is to look at the mid-tier miners that are growing through this market-cycle low ebb and running their existing assets well.

I personally look at EVR as having the same business model to NST and EVN in that they are growing into multi-mine mid tier producers (c. 500-1m oz production) and de-risking through diverse locations.

As these mines grow they are benefiting from scale and negotiating leverage on supply contracts (e.g. comments from both NST and EVN at Denver). Additionally their fixed, G&A costs, are being spread over more oz of production.

In EVR's case I believe that they are a growth and deal-making company and will continue to aggressively grow.

I understand Loki's view and concern about giving away too much of EVR on the cheap but I side with your view Mainholm that the Ity mine + USD was a good deal for both parties. The value of the Ity mine in terms of oz reserves / resources and production / EBIT were similarly valued very low and the USD provided greatly reduces balance sheet risk and increases optionality.

Like EVN, the undertaking to inject more cash in the future could allow for a further acquisition in West Africa to further grow EVR and hints that they, like EVN, are looking at possibilities.

During the Denver presentation the MD stated that at $1,100 POG Hounde would not proceed - thus Loki and the MD agree that a resource / reserve shouldn't be depleted at low POG.

EVR's balance sheet has previously been stretched and the debt load has / is holding the share price down - although it has appreciated 59% this CY to-date. This MAY be a similar path to SBM in that once the market becomes confident that the risk of failure is behind it and that there is consistent free cash flow being generated / debt being paid down the SP may well re-rate.

With a market cap of US$320m* and production of c. 580k oz p.a. there is good upside. Given that there is net debt of US$159m* good leverage exists for the MC to increase significantly as debt continues to reduce.

(*post transaction)

EVR have commented that they are enjoying favourable operating conditions (e.g. fuel costs) now and are improving their AISC.

I have put EVR alongside NST, EVN and MLX in my portfolio matrix. However, as they are due to de-list from the ASX you'll need to invest via the TSX - which isn't a bad thing in that volume is much better over there and spreads lower.

Whilst not likely, I would also welcome a merger between EVR and PRU - that would make a very solid West African producing miner with a very safe balance sheet, 6 producing mines, 2 development ready projects and one expansion project when the time is right.

Cheers
John

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Thanks for the comments J. Always good quality and thought provoking comments by you and much appreciated.

Cheers

EVR Price at posting: 63.5¢ Sentiment: None Disclosure: Not Held
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Thanks for the comments J. Always good quality and thought...

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