Shanta Gold Ltd – Modern and Discipline Approach to achieve Operational Efficiencies

Shanta Gold Limited (LON: SHG) is a mining company, which is engaged in the business of exploration, development, and production of gold in Eastern Part of Africa.

Update on Resource Estimate and JORC Reserve Estimate at Singida Project
On 26^th May 2020, Shanta Gold released an update on the Mineral Resource and Reserve Estimate in compliance with Joint Ore Reserves Committee (JORC) on Central Tanzania based Singida Gold Mining Project. The gold reserve stood at 243koz at 3.00g/t as per JORC 2012 compliance. The group has the potential to expand its reserve at depth as more than 90 per cent of contained gold from the reserve is in-between 0-120 metres. The Mineral Resource in compliance with JORC at Singida mine stood at 11.8Mt with the grading of 2.38g/t and contained 904 koz of gold. The M&I (Measured and Indicated) mineral resources increased by 17 per cent to 5.7Mt with grading 2.66g/t and contained 484 koz of gold. The group is also carrying discussions related to financing for the development of Singida and will be announced later.

Share Price Performance

Daily Chart as of June 9^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Shanta Gold Ltd shares were trading at GBX 10.89 at the time of writing before the market close (at 10:21 AM GMT+1) on 9^th June 2020 and were down by 0.77% versus the previous day closing price. Stock's 52 weeks High is GBX 13.30 and Low is GBX 6.00.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Valuation Methodology
 
 

Growth Catalysts
The group managed to reduce all-in sustaining costs and cash operating costs for the period. The group’s NI-43101 project based out of West Kenya is believed to be amongst highest grading deposits in the African region. 

Conclusion
In the first quarter of the financial year 2020, the company has shown an increase in the operational performance with adjusted EBITDA of USD 15 million and gold production increased to 20,167 ounces. The cash balance and liquidity stood for Q1 FY2020 stood at USD 15.7 million, with gross debt of USD 20.4 million for the period. The Company announced the acquisition of Kenyan assets of Barrick Gold and transaction is expected to be complete in mid-2020. The group has the potential to expand its reserve at depth below 120 metres at its Singida mine Project. SHG is in talks related to financing for the development of Singida. The company is facing certain risks such as volatility in commodity price, interest rate risks, credit risks, liquidity risks and currency risks which could affect the overall business operations of the company.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 10.86 (as on 9^th June 2020, before the market close at 8:05 AM GMT+1) and will recommend fresh buying at the right time.

Serabi Gold Plc - Focus on Costs Reduction to Maintain Healthy Margins

Serabi Gold Plc (LON: SRB) is a mining company based out of London, which is engaged in the activities for production and exploration of gold in the Brazilian region.

Financial Highlights – Declined Financial Performance in Q1 FY2020 (31^st March 2020)

(Source: Quarterly Report, Company Website)
 
In the first quarter of the financial year 2020, the revenue declined to USD 13,097,687 as against USD 17,126,040 in Q1 FY2019. Driven by an increase in the administrative expenses and share-based payments, the EBITDA declined to USD 3,200,001 in Q1 FY2020 from an EBITDA of USD 4,339,549 in Q1 FY2019. The group’s Profit after tax stood at USD 772,632 in the first quarter of the financial year 2020 versus USD 1,549,962 in the Q1 FY2019. The basic earnings per share stood at 1.31 cents in Q1 FY2020 versus 2.63 cents in Q1 FY2019.

Share Price Performance

Daily Chart as of June 9^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Serabi Gold Plc shares were trading at GBX 81.36 at the time of writing before the market close (at 10:23 AM GMT+1) on 9^th June 2020 and were up by 0.44% versus the previous day closing price. Stock's 52 weeks High is GBX 97.00 and Low is GBX 42.00.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Growth Catalysts
The company has many value-accretive projects in the pipeline with low risk and higher production. The company has a strong platform for EBITDA growth. 

Conclusion
The group has shown a decline in the financial performance in the Q1 of the financial year 2020. Both the top-line and the bottom-line performance have declined for the period. The group showed decent production level in the first quarter of the financial year 2020, and in March the production touches the highest level since the opening of operations. The company completed horizontal development of 2,878 metres in the Q1 FY2020. Due to the recent increase in the gold prices, the group received an average gold price of USD 1,549 for the period versus USD 1,287 in Q1 FY2019. The operations are impacted by the outbreak of Covid-19, and the group is taking required measures to maintain production level close to the estimates. The Company is facing certain risks such as volatility in commodity price, interest rate risks, credit risks, liquidity risks and currency risks, which could affect the financial and operational performance.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 79.55 (as on 9^th June 2020, before the market close at 9:05 AM GMT+1) and will recommend fresh buying at the right time.

Scotgold Resources Ltd – Focused on Development of High-quality Cononish Project

Scotgold Resources Limited (LON: SGZ) is a Nedlands, Australia-based company and involves in the development and exploration of mineral properties. The group research for silver and gold deposits.

Recent News
On 29^th April 2020, Scotgold Resources announced the amendment made related to the interest rate reduction, increase in availability period and principal amount to around GBP 7.5 million for a loan facility from Bridge Barn Limited.

Financial Highlights – Improved Financial Performance in H1 FY2020 (31^st December 2019)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, the company remained in the development stage and did not generate any revenue. Driven by an increase in other income and reduced expenses for the period, the group reduced its LBT & LAT (loss before tax and loss after tax) to USD 1,259,410 in the first half of the financial year 2020 from an LBT & LAT (loss before tax and loss after tax) of USD 2,124,086 in H1 FY2019. The basic loss per share stood at 2.62 cents in H1 FY2020 versus a basic loss per share of 4.81 cents in H1 FY2019. The cash balance increased to USD 4,567,789 as on 31^st December 2019 from USD 3,917,920 as on 30^th June 2019.

Share Price Performance

Daily Chart as of June 9^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Scotgold Resources Ltd shares were trading at GBX 57.15 at the time of writing before the market close (at 10:26 AM GMT+1) on 9^th June 2020 and were down by 2.30% versus the previous day closing price. Stock's 52 weeks High is GBX 85.95 and Low is GBX 30.00.

From the technical standpoint, its shares were trading below its short-term support level of 15-day simple moving average prices, which reflects a downtrend in the stock and carrying the risk to move down further.

Key Risks
The company is facing certain risks such as volatility in commodity price, interest rate risks, credit risks, liquidity risks and currency risks, which could affect the financial and operational performance.

Conclusion
The company for the first half of the financial year 2020 has not generated any revenue, and its profitability metric is in the negative zone. A mixed movement in the commodity prices may negatively impact the economic viability and profitability of the company’s projects. The gold prices in the international market had improved, but other commodity prices had weakened. The company operates in a challenging environment, which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The Company has a higher degree of threat due to future exploration, development and production uncertainties.
Based on the headwinds faced by the group, we have given a "Watch" recommendation at the current price of GBX 57.15 (as on 9^th June 2020, before the market close at 10:26 AM GMT+1), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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