Company Overview: SSR Mining Inc. (ASX: SSR) is a gold mining company with a diversified portfolio of high quality, long-life assets. In September 2020, the company got officially listed on ASX, following the completion of its merger with Alacer Gold Corp. The company is also listed on NASDAQ and the Toronto Stock Exchange. The company’s asset portfolio includes Çöpler gold mine in Turkey, Marigold mine in the USA, Seabee gold operation in Canada, and Puna operations in Argentina.

SSR Details

Advancing Organic Growth portfolio to Drive Future Performance: SSR Mining Inc. (ASX: SSR) is a leading intermediate gold mining company with a global pipeline of high-quality development and exploration assets in the USA, Turkey, Mexico, Peru, and Canada. The company strategy focuses 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. Despite the challenges caused by the COVID-19 pandemic, SSR delivered a decent operational and financial performance in FY20, with ~40.6% YoY growth in revenue and ~132.9% in net income (attributable to equity holders of SSR Mining), mainly driven by the higher average realised gold price. From 2016 to 2020, the company’s revenue and net income grew at a CAGR of ~14.81% and ~19.71%, respectively.

Revenue and Net Income Trend (Source: Analysis by Kalkine Group)

Looking ahead, the company is focused on generating peer leading free cash flow and returning capital to its shareholders. SSR is also focused on advancing its organic growth portfolio to increase production, reduce costs, and extend mine lives from its near-mine, low capital intensity pipeline. It is currently working on the commissioning of the flotation plant construction at Çöpler gold mine. SSR is of the view that this plant will drive stronger operational performance in the 2nd half of FY21.

Decent Operational and Financial Performance in FY20: For FY20, the company reported total production of 711,000 gold-equivalent ounces. The gold production from Çöpler, Marigold, and Seabee stood at 326,908oz, 234,443oz, and 81,686oz, respectively. For the full year, the company reported total revenue of US$853.08 million, up ~40.6% on the previous year, driven by the increase in production as well as improved average realised gold price. Net income attributable to equity holders of SSR Mining stood at US$133.49 million, up by 132.9% on FY19. One of the important highlights of FY20 was the completion of zero-premium merger with Alacer Gold, which transformed SSR into a leading intermediate precious metals producer with robust margins.

Decent Revenue Growth in Q1FY21: For the quarter ending 31 March 2021 (Q1FY21), the company reported total production of 196,094 gold equivalent ounces at an AISC of US$1,004 per ounce and generated $77 million of free cash flow. Total revenue for Q1FY21 stood at US$366.48 million, up ~123% on pcp, driven by a higher average realised gold price. For the quarter, the company declared and paid a quarterly cash dividend of US$0.05 per common share. As at 31 March 2021, the company had a cash and cash equivalent of US$866 million.

Key Metrics: Gross margin for Q1FY21 stood at 40.3%, up from 39.5% in Q4FY20. EBITDA margin for Q1FY21 stood at 51.7%, down from 59.2% in Q4FY20. Current ratio for Q1FY21 stood at 6.03x, up from 5.72x in Q4FY20, demonstrating that the company has improved its ability to pay short-term obligations.

Profitability Metrics and Liquidity Profile (Source: Analysis by Kalkine Group)

Increase in Mineral Reserves and Resources: On 31 March 2021, SSR reported its updated Mineral Reserves and Resources for year-end 2020. As per the update, SSR’s Gold Mineral Reserves have increased 5% to 8.0 million ounces, as compared to year-end 2019, driven primarily by additions at Çöpler. Further, SSR’s Measured and Indicated Gold Mineral Resources increased by 14% to 15.0 million ounces, resulting from an increase at Marigold and in the Çöpler District. At Marigold, SSR’s Indicated Mineral Resources increased by 9% to 5.4 million ounces of gold compared to 4.9 million ounces at year-end 2019.

Announced US$200 Million Senior Secured Revolving Credit Facility: SSR recently amended its existing undrawn revolving credit facility on favorable terms, increasing the facility size from US$75 million to US$200 million. Term of the facility has also been extended by 4 years to June 8, 2025. The company plans to use the Facility for working capital, reclamation bonding and other general corporate purposes.

Key Risks: The company is exposed to the potential impact of COVID-19 pandemic as it could cause disruption in the operations and delay production. Further, the company is also exposed to the risks associated with the fluctuations in the prices of gold and silver. 

Outlook: Looking ahead, the company is focused on advancing its large brownfield organic portfolio across Turkey, the US and Canada. For FY21, the company expects its total production from all four operating mines to be in the range of 720,000 to 800,000 gold equivalent ounces at consolidated AISC of US$1,050 to US$1,110 per gold equivalent ounce. From Çöpler, the company expects the production to be in the range of 310 – 340 koz. From Marigold, the production is expected to be between 235 – 265 koz.  The company’s free cash flow in FY21 is expected to be approximately 75% weighted to H2FY21 due to the timing of the ramp-up and commissioning of the flotation circuit at Çöpler, the timing of capital expenditures across all sites.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has corrected by 21.69% and is trading lower than the average 52-week price band of $17.50 and $33.52, offering a decent opportunity for accumulation. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). We believe the company can trade at some premium to its peers, considering the company’s improved operational and financial performance in FY20 and Q1FY21, rise in Mineral Reserves and Resources, and decent outlook. We have taken peers like OceanaGold Corp (ASX: OGC), St Barbara Ltd (ASX: SBM), Evolution Mining Ltd (ASX: EVN), etc. Considering the company’s global pipeline of high-quality development and exploration assets, continued focus on advancing its organic growth portfolio, improved operational performance in Q1FY21, current trading level and valuation, we give a “Buy” rating on the stock at the current market price of $20.40, up by 0.344% as on 29 June 2021.

SSR Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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