In a Jan. 22 research note, analyst Cosmos Chiu reported that Alacer Gold Corp.'s (ASR:TSX: AQG:ASX) 2019 consolidated production guidance is "well above" CIBC's expectations and "represents a doubling" of the company's 2018 production.
Specifically, Alacer guided to consolidated production of 320,000–380,000 ounces (320–380 Koz), higher than CIBC's previous forecast of 273 Koz and Alacer's 2018 output of 171 Koz. The difference is due to Alacer expecting more growth than CIBC in the oxide and sulphide operations at Çöpler.
However, since Alacer released its guidance, CIBC expects the gold mining company to produce a total of 325 Koz at an all-in sustaining cost (AISC) of $722 per ounce ($722/oz) and generate as much as $100 million in free cash flow in 2019.
Breaking down 2019 production guidance by facility, Alacer projects oxide plant output of 90–110 Koz at an AISC of $700–750/oz, versus CIBC's projected 74 Koz at $792/oz.
Production guidance for the sulphide plant is 230–270 Koz at a grade of 4.75 grams per ton (4.75 g/t) gold and an AISC of $600–650/oz. In comparison, CIBC originally estimated gold production there of 199 Koz at a grade of 4.5 g/t and an AISC of $471/oz but has since increased its projection to 234 Koz at an AISC of $618/oz. Alacer is expected to reach commercial production at this facility in Q1/19 and ramp it up throughout the year, aiming to reach 55% of the facility's targeted production in H2/19.
As for the difference between Alacer's 2019 cost guidance and CIBC's projected costs for the year, Alacer included a higher sustaining capex figure of $40 million, versus CIBC's $30 million. Alacer also incorporated an additional $40 million for development capex for its sulphide plant and Gediktepe project, along with another $14 million for exploration.
Upcoming catalysts for Alacer are the announcement of commercial production at the Çöpler sulfide plant, expected in Q1/19. Also, completion of two feasibility studies is anticipated this year, one for the Gediktepe project and another for a possible expansion of the Çöpler oxide facilities.
CIBC has an Outperformer rating and a CA$4 per share price target on Alacer Gold. Its stock is currently trading at around CA$3.19 per share.
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Disclosures from CIBC, Alacer Gold Corp., Earnings Update, January 22, 2019
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Important Disclosure Footnotes for Alacer Gold Corp. (ASR)
· CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Alacer Gold Corp. in the next 3 months.
