Scotia sp lowered from 4.50 C to 3.50 C Scotia on 4Q17 and 2018 Outlook. Target price lowered to C$3.50 from C$4.50
2017 Production Below Estimates After a Challenging Year;
2018 Outlook Re-Sharpens Focus on Nevada
OUR TAKE:
Klondex reported Q4/17 results that fell short of our estimates and FY
guidance with consolidated production of 47.6k Gold-Equivalent Ounces (GEOs) and
49.7k GEOs sold. We had estimated production of 59.6k GEOs with sales of 51.6k. For the full year, KDX produced 189.5k GEOs, below revised guidance of 196k
to 212k and our estimate of 201.5k. An intentional deferral in processing Hollister ore to maximize recoveries is largely responsible for the shortfall; as a result KDX reported 15k GEO in stockpile inventory (40kt @ 0.4 opt) from Hollister at year-end (with 15kt subsequently processed in Q1/18).
2018 guidance was also provided, with KDX forecasting consolidated production of 186k to 202koz Au this year with AISC of $940-$990/oz. We had modeled production of 215k GEO with AISC of $956/oz. Following model updates, our price target is lowered to C$3.50 (from C$4.50), SP rating maintained. At spot prices, KDX shares are trading at 1.8x P/NAV and 5.0x 2018 P/CF vs peers trading at 0.78x and 5.8x, respectively.
Fire Creek produced 21.2k GEOs in Q4/17 (vs. 23.4k est) and 108k GEOs for the full year, just slightly below guidance range of 109k-110k GEOs.
Midas produced 10.4k GEOs in Q4/17 (vs. 11.6k est) and 45.1k for the full year; 2017 guidance range was 48k-50k GEOs.
Hollister produced 5.9k GEOs in Q4/17 (vs. 18.2k est) and 7.4k GEOs for the full year. 2017 guidance was 21k-25k GEOs. As noted above, deferral of ore processing was the primary reason. KDX reported that 9k GEOs were mined in Q4/17. A further 985 GEOs were also produced from Aurora tailings reprocessing (vs. nil est).
True North produced 9.2koz Au; we had modeled 6.4koz Au following the early Jan/18 announcement to place these ops on care and maintenance. Tailings re-processing is planned to continue there during the warmer months.
Klondex also announced that the Investor Day scheduled for Feb 7 has been postponed owing to CEO Paul Huet having pneumonia; this will be rescheduled at a later date. Q4/17 financial results will be reported after market on Mar 14.