Wednesday, January 18, 2017

Timmins Gold Corp: Very Decent Year 2016

A few days ago Timmins Gold Corp (TGD) published its 2016 production results. In my opinion, the company made relevant progress last year.

First of all, it stopped a negative trend in gold production:

Further, the company was able to improve the economics of mining:

The chart shows revenue and direct costs per ton of ore processed. For comparison reasons, I recalculated the revenue applying a fixed price of gold over the entire period. Therefore it is easy to spot that in 2016 Timmins increased revenue delivered by one ton of ore processed at the company's mill.
In other words, the company was processing higher grade ore (0.58 grams per ton of ore in 2016 vs. 0.51 g / t in 2015). Apart from that, the company's metallurgists were able to increase a recovery ratio from 67.7% in 2015 to 70.4% in 2016.

What is more, Timmins' management cut the direct cost of production from $11.3 in 2015 to $9.4 per ton of ore processed (it is my estimate).
I think that lower strip ratios (waste mined / ore and waste mined) were standing behind this improvement:

Simply put, the company was spending less cash to mine its gold.

Despite these positives Timmins shares are trading at a very low EV / EBITDA multiple of 4.0 (assuming 4Q 2016 EBITDA of $10M). Well, it looks like the investors are afraid of Ana Paula, a gold project the company is developing. This very decent project is located in the Guerrero State, Mexico. However, this state is surely not the safest place to run any business. Ask Goldcorp about it...

1 comment:

  1. Goldcorp's Los Filos mine is a different color horse .... It seems the markets love Torex, a company that lies right next to the Timmins, Ana Paula project.

    AP is a high-margin, low-cost project that will help feed further discoveries in their huge privately own land package down in Guerrero, that is, if their not taken-out beforehand.