Edison | Oct 17, 2013 06:09AM ET
Nordgold, (NORD.L) reported its third consecutive quarterly increase in production in Q313, with the overall gold output rising 5.2% q-o-q to 245koz. Strong operating performance offset the lower gold price leading to a 1.4% top-line expansion. FY13 production is at the upper end of the guidance.
Positive cash flow generation
Nordgold indicated end-Q3 net debt of US$777m (US$802m in Q213), which implies US$25m increase in net cash. Assuming flat capex and no other significant cash in/outflows, this would suggest net operating cash flow was close to US$90m in Q313, the highest quarterly level of net OCF generation in 2012-13.
Potential Buryatzoloto LoM extension
On 11 October, Nordgold announced the acquisition of an early-stage exploration project in Buryatia, Russia, for US$0.3m. The project, which according to the Russian resource classification standard has c 2Moz in resource, is adjacent to the company’s relatively mined out Buryatzoloto mine and could be viewed as an extension of its life of mine (LoM). No further details are available at this stage.
Valuation: Headwinds from the lower gold price
Nordgold continues to generate positive newsflow, with the solid Q313 operating results, upbeat production guidance and Buryatzoloto’s LoM extension adding to the earlier announced new management hires and the Paul Isnard earn-in. All this, however, is yet to be priced in, as the stock remains under pressure due to the uncertain gold price outlook. Trading at 2013e EV/EBITDA of just 3.2x, Nordgold appears to be the cheapest play in the EM gold universe.
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