Post by
Weeble on Feb 21, 2018 2:44pm
From TD
These analysts kill me..... a downgrade headline but the Buy rating is maintained and the target is still more than double from here. It is interesting what they don't mention. I look at this latest release as a positive since there is no mention of anything negative coming from the workers in Guerrero. All of this confirms that the blogger IKN's claims of a stoppage of the mine was wrong. I normally like what he writes but in this case he seems to have really screwed up. I wonder if he will now correct his original post.
Event
Alio Gold reported Q4/17 financial results; production was previously released.
Impact: SLIGHTLY NEGATIVE
Q4 was a relatively weak quarter, which was not a surprise as the company had
previously announced pre-stripping, ramp-up delays at San Francisco in late 2017,
which decreased the Q4 production. Incorporating the results, and slightly higher cost estimates, our NAV declines to C$7.02/share from C$7.47/share previously.
Adjusted EPS of -$0.02 was below our estimate of $0.03 and consensus of $0.01,
largely due to higher-than-expected operating and overhead costs. CFPS (pre-
working capital) of $0.02/sh was below our estimate of $0.06/sh, reflecting the
higher-than-expected costs.
Operating Costs were higher-than-expected, with total cash costs of $1,041/oz
higher than our estimate of $932/oz. The increase was largely due to higher cost
per tonne mined (more waste was mined during Q4) and the ramp-up delays.
Balance sheet; financing upon completion of DFS:
Net cash decreased to $51.6mm from $68.5mm previously. Management reiterated that a potential debt financing for ~$90-$100mm is expected to be arranged in order to fund Ana Paula.
The company is reviewing proposals for the financing, which is expected to be arranged in conjunction with the completion of a Definitive Feasibility Study (DFS).
Underground contemplated for Ana Paula:
The DFS has been planned for completion in Q2 2018, however, Alio is currently evaluating a change in scope of the DFS which would include an underground mine component. Management
plans to construct an underground decline into the known extension of the high-
grade breccia extension which is below the proposed open pit. The decline
is expected to reach the area during Q3/18, after which drilling and more
development work will take place.
TD Investment Conclusion
We are maintaining our BUY recommendation but lowering our target price to
C$9.00 from C$10.50 previously on our lower NAV and slightly lower multiples.
With the optionality of the producing San Francisco mine and the new management's
focus on surfacing value for Ana Paula, which has favourable economics, we
continue to believe that there is value to be surfaced. We continue to view the company as a potential acquisition target.
Comment by
Weeble on Feb 21, 2018 2:45pm
Sorry, I should have written "negative" headline....there was no downgrade.