Catalysts
Increased in worldwide money supply might increase demand for Gold and Silver
Silver is the best electrical conductor and widely used in Solar panels
Company has one of the lowest AISC in the industry and expected to further go down
Reserves of company still growing
Potential Palladium and Platinum mining
Nezhda mine and POX-2 Refining facilities will lower AISC
Financial Analysis
GE Production of 1,559 Koz in 2020 up 4% YoY
Ores Reserves of 27.9 Moz in 2020 up 10% YoY
Gold prices increased by 24% while Silver prices increased by 47% in 2020
Revenues of $2.86 billion in 2020 up 28% YoY
AISC of $874 up 1% YoY
Total Cash Cost of $638 down 3% YoY
Net income of $1.072 billion up 83% YoY
EPS of $2.28 up 82% YoY
Dividends per share of $1.29 up 57%
Capex of $538 million up 38% YoY
FCF of $610 million up 138 YoY
Net debt of $1.35 billion down 9% YoY
Valuation
My personal Biases
Bullish on gold and silver
Lived in Russia for 5 years
5.1% of portfolio, holding since October 2019
Assumptions
Looking at conservative base case
Gold prices of $1600
AISC falls to $800
Production remains at same level
This will lead to about $1.03 billion in operating cash flow per year
$450 million on average in CapEx, giving us $580 million in FCF per year
Discount rate of 15% to account for all political, currency and commodity risks
Terminal Growth rate of 3%, about world GDP Growth
Let’s look at exit multiples based on gold prices and P/FCF Ratio
Bull case: CapEx falls to $350 million in 2025 with production up 10% from current level; Bear case: CapEx of $550 million in 2025 with production down by 5% from current level.
AISC remains at $800 in all cases
Conclusion
Above intrinsic value at current price but still good potential returns if gold prices do increase
