22 Şubat 2013 Cuma

KOZA ALTIN ISLETMELERI - Sell-off offers opportunity: BUY

Overreaction provides buying opportunity
Spot gold prices slipped 6% to USD1,570 per oz from the recent USD1,670 due to potential change in FED policy in the last two weeks. Despite the rise in its reserve and resource base, Koza’s shares plunged 8% in USD terms. With a weaker TRY, the gold price declined only 3% in TRY terms. Koza is a defensive play with 65% of its cash costs in local currency.

Cutting average gold price estimate to USD1,600 from USD1,750
Gold prices averaged USD1,660 per oz in 2013 YTD, similar to the 2012 average. While our precious metals analyst Anne-Laure Tremblay remains positive on gold, maintaining her USD1,790 per oz in 2013 (Lift-off delayed, 31 January 2013), we cut our average gold price estimate for 2013 from USD1,750 to USD1,600 to be on the conservative side.

Significant 19% upside despite 10% cut in TP on lower prices
While we maintain our production (350k oz) and cash cost (USD389/oz), estimates, we cut revenue by 9%, and EBITDA and net income by 11% for 2013 and 2014. Our TP is based on a blended valuation, assigning 75/25 weights to DCF and peers. Apart from risks arising from the gold price and USD/TRY, regulatory risks are high in the mining industry.

Attractive investment vehicle for gold exposure
We remain positive on the company as we project a CAGR of 11% in gold production, to 502k oz by 2016 thanks to three new mine projects (Diyadin, Himmetdede and Sogut), which will become fully operational in 2014, 2015 and 2016. Low cash costs and existing low-cost reserve base provide a major cushion against further weakness in gold prices. The company uses a minimum level of USD1,250 per oz in the estimation of its reserves. All else being equal, we think the company deserves a BUY rating as long as the full-year average gold price remains above USD1,500.
 
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