5 Junior Gold Stocks with Glistering Free Cash Flow

The junior gold stocks we’ve unearthed have a greater than 13% F2020E free cash flow yield

SmallCapPower | October 1, 2019: An important metric that investors should consider with mining companies is Free Cash Flow Yield (FCF), as it shows a picture of how well the company can generate cash. When companies have lots of cash, they can invest in projects that will create value for shareholders, pay a dividend, or buy back stock. Free Cash Flow is particularly important for mining companies as they have big capex requirements to set up mines and purchase machinery. Free cash flow yield is calculated by taking the company’s cash flow per share and dividing it by the share price. Today we have dug up five TSX-listed junior gold stocks that have F2020E FCF yields over 13%. For reference, the average F2020E FCF yield of our sample of 22 gold producers with market caps between $300M to $7.0B is 6.4%.

*Share prices as of September 27, 2019, data obtained from S&P Capital IQ

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Roxgold Inc. (TSX:ROXG) – $1.14

Roxgold is a gold producer operating in Burkina Faso. The Company’s flagship asset, the Yaramoko project, began commercial production in October 2016. Yaramoko is an underground gold mine located in southwest Burkina Faso, the only underground gold mine in the country. The mine hosts mineral reserves of 1.8 million tonnes grading 11.47 g/t Au for a total 662,000 oz. The mine produces an average of 125k oz per year. On August 13, 2019, Roxgold released Q2/19 financial results. During the quarter, Roxgold produced 34.4K oz/Au, a 4% decrease from Q1 (35.8K oz/Au produced). The lower average head grade was due primarily to the ramp-up of the Bagassi South underground mine, which delivered lower grade development ore during the quarter. Q2/19 results were also highlighted by revenue of $39.7M (was $45.M in Q2/18) and free cash flow of $21.8M, or $0.06/share. Management has provided 2019E guidance, with gold production expected to be between 145K and 155k oz, with cash and all-in-sustaining costs (AISC) of between US$440-$470/oz and US$765-$795/oz, respectively.

  • Market Cap: $422.6M
  • 90-Day Return: -2.3%
  • YTD-Return: +30.2%
  • 90-Day Average Trading Volume: 2,107,690
  • F2020E FCF Yield: +15.0%

Endeavour Mining Corporation (TSX:EDV) – $26.61

Endeavour Mining owns and operates four producing mines in West Africa, including the Agbaou and Ity open-pit gold mines in Cote d’Ivoire, and the Hounde and Karma open-pit gold mines in Burkina Faso. In addition, Endeavour has a strong portfolio of development and exploration assets in West Africa. Its portfolio includes over 40 exploration licenses covering approximately 7,190 square kilometers with over 200 identified targets. On September 3, 2019, Endeavour announced a new resource for the Lafigue target at the Fetekro project in Cote d’Ivoire. Its Indicated resource increased 141% to 1.2M oz/Au from a prior resource estimate of 494K oz/Au. Endeavour’s next steps include a further 30,000 meter drilling program expected to begin in Q4/19. Management guidance is F2019 gold production of ~540K to ~610K oz/Au, with cash costs of C$790/oz and ASIC of C$851/oz.

  • Market Cap: $2,925.1M
  • 90-Day Return: +16.6%
  • YTD-Return: +13.0%
  • 90-Day Average Trading Volume: 325,170
  • F2020E FCF Yield: +16.2%

Eldorado Gold Corporation (TSX:ELD) – $10.42

Eldorado Gold is a gold and base metals producer that has mining, development and exploration operations in Turkey, Canada, Greece, Romania, Serbia, and Brazil. In Turkey, the Company operates two gold mines: 1) Kışladağ (open pit); and 2) Efemçukuru (underground operation). In Greece, it operates two polymetallic mines: 1) Olympias; and 2) Stratoni (underground). In Quebec, it operates the Lamaque underground gold mine. And in Brazil, the Company operates Vila Nova, an open-pit, iron ore mine. On August 1, 2019, ELD announced its Q2/19 financial results, reporting revenue of C$173.7M. Eldorado’s all-in-sustaining costs for the quarter were C$917 per ounce of gold sold, which is 1.8% lower quarter-over-quarter.

  • Market Cap: $1,650.9M
  • 90-Day Return: +22.0%
  • YTD-Return: +149.8%
  • 90-Day Average Trading Volume: 1,634,800
  • F2020E FCF Yield: +13.5%

SEMAFO Inc. (TSX:SMF) – $4.41

SEMAFO is a Canada-based, intermediate gold producer. The Company builds and operates two mines in West Africa: the Boungou (open pit) and Mana Mines, both located in Burkina Faso. The Company had gold production of 102,400 ounces in Q1/19. This is up 125% from Q1/18’s 45,500 ounces. In Q1/19, the Company had a consolidated gold production cost between $390-$420/oz and an all-in-sustaining cost ($/oz) between $685-$735/oz. On June 3, 2019, the Company announced results from its ongoing exploration program at Bantou. The exploration resulted in a new significant gold discovery called Bantou Nord from its 43-hole (7,782 meter) samples. The drill results included 128 metres grading 2.54 g/t Au, but there were several other intersections of +/- 100-meter lengths that had grades ranging from 1.1 g/t Au to 1.5 g/t Au. There were also a few higher-grade intervals that had samples that returned 6.50 g/t Au over 26 metres.

  • Market Cap: $1,474.9M
  • 90-Day Return: -15.1%
  • YTD-Return: +43.4%
  • 90-Day Average Trading Volume: 1,122,200
  • F2020E FCF Yield: +17.3%

Torex Gold Resources Inc. (TSX:TXG) – $17.46

Torex is a mid-tier gold producer that operates in Mexico. The Company is engaged in the exploration, development and operation of the Morelos Gold Property located in the Guerrero Gold Belt in southern Mexico. Torex is currently bringing its El Limon-Guajes mine up to full production. The Company also owns the Media Luna copper-gold deposit on the same property that would utilize a centralized processing centre for both mines once its developed. On August 8, 2019, Torex reported Q2/19 financial results, which were highlighted by revenue of $150.7M, cash flow from operations of $48.6M, and net income of $10.0M. The Company mined 113,645 oz/Au with cash costs of C$606/oz and ASIC of C$760/oz.

  • Market Cap: $1,488.8M
  • 90-Day Return: +20.8%
  • YTD-Return: +25.8%
  • 90-Day Average Trading Volume: 460,320
  • F2020E FCF Yield: +13.1%

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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