We continue to like Timmins as a straightforward producer with, strong
cash flow and organic growth prospects in a good jurisdiction
with an attractive valuation in our view. We are maintaining our BUY rating
and C$3.00 target price.
Outlook
•
2013 guidance maintained
at 125
-
130k oz. Cash operating costs are expected to be in the range
of $700
-
750/oz.
•
Reserve and resource update expected in Septembe
r
:
management indicated they expect to see a
material increase based on the encouraging preliminary drill results released in H1/13. Drilling is now
complete and has largely been
in
-
fill and b
elow the bottom of the existing pit design, suggesting good
potential for conversion of resources into reserves and adding additional resources. Also drill results from
the new San Francisco East target are encouraging as they support the continuity of the
mineral trend and
potential for additional satellite deposits
.
The company will use $1,100 gold for its reserve calculation and
$1,200/oz gold for its mine plan.
•
Planned shift of production and cost profile:
the company expects to realize sequentially h
igher
production for the remainder of the year, however is guiding towards an increase in total net cash costs per
ounce due to the processing of lower grade material.