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Cash Generating Machines

Cash Generating Machines

Here we are almost 1/4 way through 2017 and while March has been a down month so far. The miners continue to outperform on the year. With the recent rise in the AUD gold price coinciding with the decline in Aussie Gold Companies, I thought it may be a good idea to revisit the fundamentals…. (how much money they make!)

Below are my 5 favourite gold miners currently. I have been moving funds away from NST and moving them into RMS and BLK looking for more growth opportunities. While I consider NST to be the #1 gold stock on the ASX, it has becoming a little boring to hold, I would like to see more of an Evolution type business with all that free cash.

Below are the 5 companies which I have listed the costs, profit and revenue based on the numbers in their latest quarterly. For Blackham I have used 120kozpa and also 200kozpa for the future. The gold price I have been conservative with an average of $1600 AUD, currently at $1634.

As you can see the larger cap companies are trading for about 2-3x sales while BLK and RMS are trading near 1x sales. Why is this the case? Gold sentiment is still in the toilet. 

As an investor who has been in NST since 90c, RSG at 60c and BLK at 20c would I still buy at these levels? Absolutely – and I am on pullbacks like this week.

While gold in Australian dollar terms slowly rises and the shares get sold off because of USD sentiment, that is the time to strike.

Here are the numbers…

Northern Star Resources

Current Market Cap – $2.46B

Gold Price AISC Profit Per Oz Oz Produced Revenue Profit
$1,400.00 $1,050.00 $350.00 500,000 $700,000,000 $175,000,000
$1,500.00 $1,050.00 $450.00 500,000 $750,000,000 $225,000,000
$1,600.00 $1,050.00 $550.00 500,000 $800,000,000 $275,000,000
$1,700.00 $1,050.00 $650.00 500,000 $850,000,000 $325,000,000
$1,800.00 $1,050.00 $750.00 500,000 $900,000,000 $375,000,000

 

Resoulte Mining

Current Market Cap – $1.0B

Gold Price AISC Profit Per Oz Oz Produced Revenue Profit
$1,400.00 $1,280.00 $120.00 300,000 $420,000,000 $36,000,000
$1,500.00 $1,280.00 $220.00 300,000 $450,000,000 $66,000,000
$1,600.00 $1,280.00 $320.00 300,000 $480,000,000 $96,000,000
$1,700.00 $1,280.00 $420.00 300,000 $510,000,000 $126,000,000
$1,800.00 $1,280.00 $520.00 300,000 $540,000,000 $156,000,000

 

Evolution Mining

Current Market Cap – $3.44B

Gold Price AISC Profit Per Oz Oz Produced Revenue Profit
$1,400.00 $930.00 $470.00 830,000 $1,162,000,000 $390,100,000
$1,500.00 $930.00 $570.00 830,000 $1,245,000,000 $473,100,000
$1,600.00 $930.00 $670.00 830,000 $1,328,000,000 $556,100,000
$1,700.00 $930.00 $770.00 830,000 $1,411,000,000 $639,100,000
$1,800.00 $930.00 $870.00 830,000 $1,494,000,000 $722,100,000

 

Ramelius Resources

Current Market Cap – $262M

Gold Price AISC Profit Per Oz Oz Produced Revenue Profit
$1,400.00 $1,100.00 $300.00 140,000 $196,000,000 $42,000,000
$1,500.00 $1,100.00 $400.00 140,000 $210,000,000 $56,000,000
$1,600.00 $1,040.00 $560.00 140,000 $224,000,000 $78,400,000
$1,700.00 $1,100.00 $600.00 140,000 $238,000,000 $84,000,000
$1,800.00 $1,100.00 $700.00 140,000 $252,000,000 $98,000,000

 

Blackham Resources 120kozpa

Current Market Cap – $186M

Gold Price AISC Profit Per Oz Oz Produced Revenue Profit
$1,400.00 $1,140.00 $260.00 120,000 $168,000,000 $31,200,000
$1,500.00 $1,140.00 $360.00 120,000 $180,000,000 $43,200,000
$1,600.00 $1,140.00 $460.00 120,000 $192,000,000 $55,200,000
$1,700.00 $1,140.00 $560.00 120,000 $204,000,000 $67,200,000
$1,800.00 $1,140.00 $660.00 120,000 $216,000,000 $79,200,000

 

Blackham Resources 200kozpa

Current Market Cap – $186M

Gold Price AISC Profit Per Oz Oz Produced Revenue Profit
$1,400.00 $1,140.00 $260.00 200,000 $280,000,000 $52,000,000
$1,500.00 $1,140.00 $360.00 200,000 $300,000,000 $72,000,000
$1,600.00 $1,140.00 $460.00 200,000 $320,000,000 $92,000,000
$1,700.00 $1,140.00 $560.00 200,000 $340,000,000 $112,000,000
$1,800.00 $1,140.00 $660.00 200,000 $360,000,000 $132,000,000

 

With the cash generating abilities of the above companies and many more on the ASX, how long can the stock prices remain this low? I’m betting not that much longer as long as the AUD gold price remains at elevated levels and sentiment slowly changes.

Edit: I forgot to add the cash positions which make them even more of a bargain. NST – $300M in cash and bullion. RSG $280M in cash investments and bullion. RMS $95M in cash and bullion. 

EVN has debt but paying it off quickly. BLK just raised capital and should be net cash positive by the end of the quarter.

| The Speculator

10 Comments

  1. the Merchant

    SBM would be a buy around $2.20. EVN around $1.90.

    Reply
  2. Ice Doctor

    Awesome, they have certainly been raking in the cash, and astonishingly few articles actually show these figures. There were times in 2015 when some of their cash flow figures were 50% of enterprise value when gold headed for 1600 AUD and I have been a long term holder (missing BLK until a couple of weeks ago). What do you think about SBM also for the list with figures at least as good?

    I have used a free cash flow (calculated from actual change in cash over the quarter accounting for dividends and capital spending to increase production) divided by enterprise value to account for cash and debt fairly, SBM & RSG pulled in an equivalent full year free cash of 25% of their enterprise value! RMS 15% (previous quarter 30%), while NST and EVN were around 10% averaged over quarters. This is even more amazing when you factor in some of these miners have already increased their share price by at least 200%, (RMS and SBM by over 1000% so now making more cash in a month than their entire value 3 years ago).

    Thanks again for setting out those forecasts against gold price, I have really enjoyed all the articles here but never quite had the excitement level to post before!

    Reply
    • the Speculator

      Thanks Ice Doctor, the valuations on some companies is totally out of wack. I’ve got a small explorer on my watch list that is trading for its cash position only with proven gold in the ground and more than $10m in the bank.

      I don’t watch SBM that closely because I think the growth has already been factored in, but their position would be similar to the others.

      Reply
      • Ice Doctor

        I agree the growth is factored in, and their production and grades have peaked so will need to spend to maintain production. However, as a “cash generating machine” they are raking in 300M cash per year with 1200M market cap … They have been so busy paying of a 300M net debt position last year i think this year they will get some notice with the cash balance growing so fast.

        I thought about a few explorers I could just buy a little in and forget since the financing stages are to difficult to pick share price movements and hard to hold when you see price going so far down. Not really my style though

        Interestingly yesterday SBM announced buying 10% into an explorer they liked for an insignificant portion of their cash flow, smaller than movements in working capital. They have done a few similar transactions, hopefully enough to grow in the long term. Not trying to push them, it is tough to pick an entry now.

        Reply
  3. John Green

    Thanks for that Jack. Ive been picking up the Goldies as well and its encouraging to see Im not alone and maybe not crazy 🙂

    Reply
  4. Celeste

    Love this piece. So optimistic. Thank you.

    Reply
    • the Merchant

      This is officially one of my favourite Chamber articles. Ever.
      The Speculator is truly awesome.

      Reply
      • the Speculator

        😀

        Reply
      • Celeste

        So awesome I have been sharing it around. 😉

        Reply

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