Company Overview: SSR Mining Inc. (ASX: SSR) is a gold mining company with a diversified asset portfolio, comprising high-margin, long-life assets located in several of the world's most prolific metal districts. The company’s producing assets are located in the USA, Turkey, Canada, and Argentina, with development and exploration assets in the USA, Turkey, Mexico, Peru, and Canada. SSR controls 80% of the shares of Anagold Madencilik Sanayi ve Ticaret Anonim Şirketi (Anagold), a company that holds Çöpler project. SSR is listed on three stock exchanges – NASDAQ, the Toronto Stock Exchange, and Australian Stock Exchange.

SSR Details

A Global Pipeline of High-Margin, Long-Life Assets: SSR Mining Inc. (ASX: SSR) is a gold mining company with producing assets, located in the USA, Turkey, Canada, and Argentina. On 17 September 2020, the company was admitted to the Official List of ASX Limited, following the completion of the merger with Alacer Gold Corp. As on 12 January 2021, the company’s market capitalisation stood at ~A$5.33 billion. The transaction with Alacer has created SSR an intermediate precious metals producer with robust margins and long mine lives. The company’s diversified asset portfolio is comprised of high-margin, long-life assets including Çöpler Gold Mine, Marigold Mine, Seabee Gold Operation, and Puna Operations. The company is focused on leveraging its robust balance sheet and proven track record of free cash flow generation to fund growth across its portfolio organically and to deliver superior returns to shareholders. From 2015 to 2019, the company’s revenue witnessed a CAGR of 12.77%.

Revenue Trend in FY15-FY19 (Source: Refinitiv, Thomson Reuters)

Currently, the company is focused on completing the integration efforts with Alacer Gold Corp. and assessing its extensive growth and development portfolio. Looking ahead, the company is focused on expanding its development pipeline and is looking for mine projects that can leverage existing mine infrastructure and new standalone projects. At its Çöpler Gold Mine, SSR intends to fast-track the extension of Çöpler oxide ore production, along with the mobilisation of a project and development team to deliver the growth potential identified around the Çöpler District. The company expects to report decent production numbers in FY20, with production and free cash flow generation expected to be heavily weighted to Q4FY20.

H1FY20 Result Highlights: For the six months ended 30 June 2020 (H1FY20), the gold production from Çöpler, Marigold, Seabee stood at 167,212 ounces, 108,366 ounces and 108,366 ounces, respectively. From Puna operations, the company reported silver production of 2.1 million ounces at the mine site with an AISC of US$16.72 per ounce. For H1FY20, SSR reported total revenue of US$256.95 million and a total operating income of US$29.6 million. As of 30 June 2020, the combined cash balance of SSR and Alacer Gold Corp stood at US$703 million and debt balance at US$475 million.

H1FY20 Result Highlights (Source: Company Reports)

Key Metrics: For Q3FY20, SSR reported gross margin and net margin of 36.9% and 11.1%, respectively. For the same period, the company’s EBITDA margin stood at 37.4%, higher than the margin of 6.7% in Q2FY20. The current ratio for Q3FY20 stood at 5.4x, higher than the industry median of 2.60x, demonstrating that the company is well-equipped to pay its short-term obligations. Debt to equity multiple for Q3FY20 stood at 0.16x, lower than the industry median of 0.21x.

Key Metrics (Source: Refinitiv, Thomson Reuters)

Q3FY20 Result Highlights: During the September 2020 quarter, the company produced 106,838 ounces of gold equivalent at an AISC of US$1,034/ounce. From its Marigold mine, the company produced 49,137 ounces of gold, a decrease of 7% compared pcp, predominantly due to lower gold grades stacked within the previous three months. At Seabee, the company produced 20,249 ounces of gold at AISC of US$988 per ounce. From Puna, the company produced 1.3 million ounces of silver at an AISC of US$11.26 per ounce. From the date of acquisition to quarter-end, Çöpler produced 19,586 ounces of gold at an AISC of US$737 per ounce.

During the quarter, the company continued its several exploration programs and reported decent exploration results across its portfolio at Çöpler, Marigold and Seabee. For Q3FY20, SSR reported total revenue of US$225.41 million, higher than the revenue of US$147.85 million reported in the previous corresponding period (pcp). The total operating income for Q3FY20 stood at US$52.72 million, higher than the income of US$39.89 million in pcp. As of 30 September 2020, the company had a consolidated cash balance of US$772.8 million.

Q3FY20 Results (Source: Company Reports)

Copper-Gold Porphyry Intersected At Çöpler: On 25 November 2020, announced positive results from the diamond drilling program for the Çöpler copper-gold porphyry target, C2, which sits directly below the Çöpler Main pit. Under the program, SSR has drilled four diamond drill holes, and all these holes have intersected gold-rich copper porphyry mineralisation. The results demonstrate the long-term potential of Çöpler.

Announced a Dividend Policy: On November 12, 2020, SSR announced that its Board of Directors has approved the initiation of a quarterly cash dividend of $0.05 per share beginning in the first quarter of 2021. This decision is in-line with the interests of shareholders in stronger gold price environments. SSR intends to return excess attributable free cash flow to shareholders through a two-tiered capital return structure. SSR may supplement its quarterly dividend through incremental dividends or share buyback programs.

Positive Results from Copler District Master Plan Studies: On 2 December 2020, the company announced the positive results of its independently prepared Master Plan study of the Çöpler District, demonstrating the long-term value and the significant organic growth potential of this world-class operation. As per the results, there has been a significant increase in Mineral Reserves and Mineral Resources. The updated figures represented a 22% growth in Mineral Reserves to 4.0 MOZ, compared to the figures as of 31 December 2019. Further, the Measured & Indicated Mineral Resources have increased by 24% to 7.4 Moz. Notably, the Master Plan feasibility level study reserve case produced an NPV^5% of $1.7 billion.

Key Risk: The company is exposed to the risks associated with any changes in regulations or shifts in political attitudes in the jurisdictions in which it operates, including Argentina, Mexico, Peru and the United States. As an intermediate gold producer, SSR is exposed to the risks associated with fluctuations in the prices of gold. Further, the company’s actual production, costs and financial returns may vary significantly from the estimates depending on a variety of factors, including mine failures, slope failures or equipment failures; industrial accidents; shortages of principal supplies needed for operations, etc.

Outlook: For FY20, the company expects its total production to be between 680,000 to 760,000 gold equivalent ounces from its four operating mines at a consolidated AISC of US$965 to US$1,040 per gold equivalent ounce. The H2FY20 production is expected to be 55% to 60% weighted towards the fourth quarter due to both Seabee and Puna ramping up operations in the third quarter and higher processed grades during the fourth quarter at Çöpler. For Çöpler, the company expects its total gold production in FY20 between 310,000 to 360,000 ounces with AISC expected to be in the range of US$710 and US$760 per ounce. For Marigold, the company expects total FY20 gold production to be between 225,000 to 240,000 ounces.

FY20 Guidance (Source: Company Reports)

Key Valuation Metrics (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (illustrative)

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last one-month period, the stock of SSR has corrected by 2.89% and is trading close to its all-time low price of A$23.120. On the technical analysis front, the stock of SSR has a support level of ~A$23.413 and resistance of ~A$26.11. We have valued the stock using the price to cash flow multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like OceanaGold Corp (ASX: OGC), Northern Star Resources Ltd (ASX: NST), St Barbara Ltd (ASX: SBM), etc. Considering the company’s portfolio of high margin and long-life assets, merger with Alacer Gold Corp, FY20 production outlook, current trading level and valuation, we give a “Buy” recommendation on the stock at the current market price of A$24.130, down by 0.700% on 12 January 2021.

SSR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer 

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.