Hi all,
Below is table from a recent Canaccord Genuity (CG) broker report that a friend kindly posted on the BDR forum a couple of days ago.
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I have not yet seen the full report for MLX, however judging the numbers above one could reasonably presume that CG are extremely bullish on MLX in the current (rising gold price) environment.
In fact the above table indicates that MLX (according to CG) is currently one of the most undervalued local gold producers on the market. The table illustrates that based on a $1.07 SP (a premium of 8% to the current price),
the equivalent implied gold price is US$1035. However at a spot price of US$1237, CG believe that fair value is $1.64 and their current target price for MLX is $1.70 (a 72% premium to the current SP).
By contrast, market darlings like NST, EVN and OGC are currently overvalued according to CG. However my own analysis suggests that on the whole, CG's targets in the above table could be a tad conservative and I wouldn't be at all surprised to see the majority of stocks in this sector eventually revised upwards. This bodes well for MLX in as much as CG's $1.70 target may also prove to be conservative.
Given that MLX's
gold only resource base across 7 gold projects totals @17.5 million ounces, the current Enterprise Value per gold resource ounce is @$22. Compare this with other gold producers in the table below, keeping in mind that the data was compiled in Oct 2015 and the average SP for local producers (inc. EVN, NST and RRL) has appreciated 30-40% since Sept qtr 2015 data was released. In stark contrast, the SP for MLX has depreciated @16%, highlighting the growing valuation disconnect between MLX and it's peers.
Sidenote 1: I haven't calculated the EV/R Au equiv. oz value for MLX, but when you add the gold equivalent value of MLX's base metals resources then we would be looking at a EV/R figure well under $20. Something to also keep in mind now and in the future.
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Sidenote 2. Although much of the negative sentiment surrounding MLX is due to the current viability of it's base metals projects (particularly nickel and copper) and the focus on non-gold acquisitions including the takeover of ABY (copper), we should be mindful that only @20% of the company's bottom line is generated from its base metals operations.
Notes on CY 16.
With 300koz gold production forecasted for CY16 at an avg. Cash Cost of A$1115, margins relative to a higher All In Cost remain healthy thanks to a solid hedging program ($A1630 from memory) combined with the spot price in A$ approaching its record high. Good timing too as the March qtr. guidance of 58koz at $1300 is almost $200 higher than expected for the full CY. Obviously management are anticipating a significant reduction in Cash Costs for the remaining quarters. Thus it's no surprise that CG are extremely bullish on MLX right now.
Also it is worth noting that shortly after the release of the above table (from CG) and CG's BDR report, BDR's share price has appreciated @50% in recent days. This follows a conservative but solid CY16 guidance from their management. Thus BDR is now just 6 cents shy of CG's current target price.
Based on my own analysis and the views of CG, my feeling is that MLX has largely gone unnoticed (or at least been ignored) by the gold investment community recently because it isn't a pure play gold producer. However my belief is that investors will soon be searching for that next (undervalued) cab off the rank and MLX will no doubt be in the mix, given their solid gold production profile. Following a healthy period of consolidation, the SP has a lot of catching up to do to reach fair value IMO and will soon make a run towards CG's initial target.
Finally, a quick look at the MLX's (LT) monthly chart illustrates the oversold position and IMO the stochastics suggest that we are on the cusp of a sizeable move northwards. There is plenty of room within the current channel (bull flag?) for a run up to $1.30-$1.40 in the near future i.e. before a breakout of that range (to new highs) could be considered.
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GLTA and please note that my opinion and analysis should not be relied upon nor considered as advice of any kind. Please DYOR.
Disclosure: I hold both MLX and BDR amongst other local and international goldies.
(20min delay)