found this at TD 1.5
2.0
2.5
3.0
3.5
4.0
TMM-T: Price
Please see the final pages of
this document for important
disclosure information.
Timmins Gold Corp.
(TMM-T, TGD-N) C$1.49
Solid reserve growth; Mine plan focused on near-term cash flow
Event
Timmins announced updated reserves and resources and a revised long-term
mine plan for its San Francisco Mine.
Impact — POSITIVE
Timmins announced a 20% reserve increase at the San Francisco mine on the
back of approximately 220,000 meters of drilling over the last year and a half.
This extends the reserve life by approximately two years. In addition, inferred
resources grew significantly to 1.78mm oz from 1.0mm oz, providing future
reserve growth potential through in-fill drilling.
Additionally, the company provided details of its updated mine plan
incorporating the increased reserves. The revised plan defers some of the
capital-heavy initiatives such as production from the La Chicharra pit to 2016
(we had been assuming 2015). We believe that this is a prudent strategy to
focus on cash generation in the short term to shore up the balance sheet. We
would note that despite our sustaining capital assumptions, which we believe
are above consensus, of approximately $20mm/year (leach pad expansion,
capitalized strip and exploration), we have Timmins generating solid free cash
flow averaging $27mm/year over the next two years.
We have revised our model to include the new reserve and mine plan.
Additionally, we have incorporated the new Mexican mining tax as currently
passed; our corporate NAV increases to C$2.60 from C$2.54/share
previously, reflecting an approximately C$0.25/share increase owing to the
reserve update, offset by a C$0.20 decline due to the new tax assumptions.
We believe that the stock has been weak of late, partially due to delays in
releasing this new mining plan. However, with no negative surprises in
the release, we believe that the stock should rebound given its significant
valuation discount and solid recent results. We are maintaining our BUY
rating, but lowering our target price to C$2.75 from C$3.00 previously,
reflecting our slightly lower 2014 cash flow estimates.
Gold and Precious Minerals - Mid-and
Small-Cap Golds
Recommendation: BUY
Unchanged
Risk: HIGH
12-Month Target Price: C$2.75
Prior: C$3.00
12-Month Dividend: C$0.00
12-Month Total Return: 84.6%
Market Data (C$)
Current Price $1.49
52-Wk Range $1.36-$3.48
Mkt Cap (f.d.)($mm) $222.0
EV ($mm) $228.5
Current Dividend --
Dividend Yield --
Avg. Daily Trading Vol. (3M-All Exch) 460975
Financial Data (C$)
Fiscal Y-E December
Shares O/S (f.d.)(mm) 149.0
Shares O/S (basic)(mm) 144.2
Float Shares (mm) 149.0
Net Debt/Tot Cap --
NAVPS (current)(f.d.) $2.60
Estimates (US$)
Year 2011A 2012A 2013E 2014E
EBITDA ($mm) 55.9 68.5 64.5 59.7
EBITDA (old)($mm) -- -- 64.5 63.7
EPS (f.d.) 0.20 0.22 0.23 0.20
EPS (f.d.)(old) -- -- 0.23 0.21
CFPS (f.d.) 0.42 0.39 0.43 0.35
CFPS (f.d.)(old) -- -- 0.43 0.38
EPS (f.d.) Quarterly Estimates (US$)
Year 2011A 2012A 2013E 2014E
Q1 -- 0.04 0.10 --
Q2 -- 0.04 0.04 --
Q3 -- 0.05 0.03 --
Q4 -- 0.09 0.06 --
Valuations
Year 2011A 2012A 2013E 2014E
P/E (f.d.) 7.1x 6.5x 6.2x 7.1x
P/CFPS (f.d.) 3.4x 3.7x 3.3x 4.1x
Supplemental Data
Year 2011A 2012A 2013E 2014E
Gold US$/oz 1,572 1,669 1,432 1,350
Gold Pr'n oz 74,241 94,444 116,895 121,352
All fi