In a July 30 research note, CIBC analyst Cosmos Chiu reported that Alacer Gold Corp.'s (ASR:TSX; ALACF:OTMKTS; AQG:ASX) "Q2/19 results included solid production and better-than-expected sales that drove an earnings per share beat."
Chiu reviewed Alacer's production and related cost during Q2/19. The company produced 99,500 ounces (99.5 Koz), above CIBC's forecasted 98.1 Koz. The all-in sustaining cost (AISC) was also better than expected, coming in at $669 per ounce versus CIBC's $743 per ounce estimate.
Production for all of H1/19 totaled 95 Koz, on the lower end of full-year guidance of 90–110 Koz. Consequently, Alacer increased oxide production guidance for the year to 125–145 Koz at an AISC of $650–700 per ounce, down from previous cost guidance of $700–750 an ounce.
The Çöpler sulfide oxide plant, currently being ramped up, outperformed in Q2/19, delivering 57 Koz, a 53% quarter-over-quarter increase.
Year-to-date production at Çöpler was 94 Koz, against full-year 2019 guidance of 230–270 Koz. The plant remains on track to meet the lower end of that range. "We currently model 229 Koz production from the sulfides in 2019, at an AISC of $622 per ounce," Chiu commented.
As for Alacer's Q2/19 financials, Chiu noted, adjusted EPS of $0.08 exceeded CIBC's $0.04 forecast and consensus' $0.03 projection, primarily due to higher-than-expected sales from the Çöpler sulfide plant.
Cash flow per share also was a beat at $0.13 versus CIBC and consensus' $0.11 estimate.
At the end of Q2/19, Alacer had $125 million in cash, including restricted cash, and net debt of about $180 million. CIBC estimates that Alacer's free cash flow in 2019 will surpass $150 million, based on the current gold price of $1,425 per ounce.
Finally, Chiu presented potential upcoming key catalysts. They include continued ramp-up of Çöpler, exploration results from the Çöpler complex and engineering study results regarding the addition of a stand-alone leach pad at Çöpler or a significant expansion of the existing one.
CIBC has an Outperformer rating and a CA$6 per share target price on Alacer Gold, whose stock is currently trading at around CA$5.21 per share.
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Disclosures from CIBC, Alacer Gold Corp., Earnings Update, July 30, 2019
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Important Disclosure Footnotes for Alacer Gold Corp. (ASR)
• CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Alacer Gold Corp. in the next 3 months.
