RE:RE:Scotia Capital maintains $2.25 2014CalgaryKid:
Timmins Gold Corp.
Materials - Gold & Precious Minerals
(TMM-T,TGD-A)[US$]
1May14: C$1.53
1-Year Target: C$2.25 Div. (NTM): $0.00 Div. (Current): $0.00 Rating: Sector Perform
1-Year ROR: 47.1% Yield (Current): 0.0% Risk: High
Qtly EPS (FD) (Next Release: Aug-14)
Year
2012A $0.03A $0.04A $0.09A $0.09A $0.26
2013A $0.10A $0.02A $0.03A $0.03A $0.21
2014E $0.05A $0.04 $0.02 $0.01 $0.13
2015E $0.04 $0.04 $0.04 $0.04 $0.17
Industry Specific
2012A 2013A 2014E 2015E 2016E
Rlzd. Gold Price (/oz) $1,661 $1,358 $1,298 $1,400 $1,500
Production (oz) (000) 94.4 119.7 123.7 120.6 123.1
Tot. Cash Cost ($/oz) $743 $717 $813 $782 $865
Capex (M) $34.3 $53.1 $21.4 $18.1 $16.5
Mar Jun Sep Dec
Net Asset Value: C$1.99 Price/NAV: 0.77x
Capitalization
Market Cap (M) C$267
Net Debt + Pref. (M) $-41
Enterprise Value (M) C$223
Shares O/S (M) 175
Float O/S (M) 168
Control Blocks
Sentry Investments Inc.
Voting Interest 16.1%
Equity Interest 16.1%
IBES Estimates
EPS 2014E $0.13
EPS 2015E $0.12
Source: Global Insight, Inc.
Valuation: 1.10x NAVPS
Key Risks to Target: Multiple contraction, commodity prices, technical and operational
risks, and geopolitical risks
Financial Analysis
December-31 2010A 2011A 2012A 2013A 2014E 2015E 2016E
10-13 13-15
Average Growth
Per-Share Data (FD)
Earnings $-0.05 $0.12 $0.26 $0.21 $0.13 $0.17 $0.17 -10.0%
Cash Flow $-0.09 $0.14 $0.40 $0.44 $0.27 $0.29 $0.31 -19.0%
Dividends $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Shares O/S (M) 174.8 174.8 144.5 146.1 169.9 169.9 169.9 7.8%
Valuation Ratio
Price/Earnings n.m. 16.1x 11.6x 5.1x 11.1x 8.3x 8.1x
Price/Cash Flow n.m. 14.0x 7.5x 2.4x 5.1x 4.9x 4.6x
Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Price/Book 4.1x 1.9x 2.3x 0.6x 0.8x 0.7x 0.6x
Profitability
Revenues (M) $0 $91 $156 $161 $162 $169 $185 2.5%
EBITDA (M) $-8 $44 $69 $57 $49 $58 $62 1.6%
EBITDA Margin n.m. 48.9% 43.9% 35.3% 30.2% 34.6% 33.7%
Income Tax Rate 0.0% 36.2% 36.9% 30.0% 30.0% 30.0% 30.0%
Net Income (M) $-8.62 $20.87 $36.07 $15.34 $21.40 $28.54 $29.39 36.4%
Return on Equity n.m. 14.1% 21.8% 13.9% 7.5% 9.2% 8.2%
Debt Analysis
Current Ratio 0.9x 1.3x 1.8x 1.8x 4.3x 6.1x 7.7x
Capital Structure
Total Assets (M) $82 $162 $218 $269 $308 $353 $406 14.7%
Working Capital (M) $-1 $12 $31 $35 $84 $115 $151 80.7%
Long-Term Debt (M) $8 $0 $0 $2 $2 $0 $0
Common Equity (M) $54 $102 $145 $164 $225 $276 $328 29.6%
Total Capital (M) $52 $83 $87 $90 $129 $151 $174 29.8%
Company Profile
Timmins Gold Corp. (Timmins) is a Vancouver-based gold producer with the operating
San Francisco open-pit heap leach gold mine in Sonora, Mexico. The company plans to
continue building shareholder value through optimization of gold production at San
Francisco, the exploration and development of existing projects, and by actively
pursuing accretive transactions.
Business Mix (Based on revenues unless otherwise noted)
100% Gold
Comparable Companies (TSX unless otherwise noted)
AGI, ANV, AR, ASR, P, RIO
Recent Update Text as of 30APR14
. Timmins reported Q1/14 adjusted EPS of $0.05, missing our estimate of $0.07 and
consensus of $0.06 largely due to higher operating costs.
. Cash costs for the quarter of $703/oz were 6% above our estimate of $663/oz on
higher mining, crushing, and gold recovery costs. The company reported AISC of
$790/oz in Q1/14, continuing the downward trend from $857/oz in Q4/13.
. Due to higher-than-expected capex (payment of payables related to 2013 capital
items) of $9.9M vs. our estimate of $6.3M, Timmins reported a slight $2.6M
decline (net of financing proceeds) in its cash position at quarter-end vs. our
estimate of a ~$5M increase. CFPS of $0.12 was a cent above our estimate of
$0.11. We will be looking for the company to add ~$6M to its cash balance in
Q2/14.
. Recall the company pre-released Q1/14 production of 35.4 koz. Guidance for 2014
is unchanged at 115 to 125 koz at a cash cost of about $800/oz. We model 2014
production of ~124 koz at $813/oz.
. Operationally, we expect slight QoQ sequential declines in production for the
balance of 2014 as the leach pad height increases (TMM began stacking on a new
pad in Q4/13) and as the average grade of the stacked material trends lower.
. We rate Timmins Sector Perform with a C$2.25 one-year target price.
Ovais Habib (Scotia Capital Inc. - Canada)
ovais.habib@scotiabank.com / (416) 863-7141
EDGE Scotiabank GBM For Reg AC and important disclosures please visit www.gbm.scotiabank.com/disc