CA - Torex Gold: The Media Luna Project Is 24% Completed
2023-07-03 13:43:28 ET
Summary
- Torex Gold posted $228.8 million in revenues this quarter compared with the $207.7 million indicated in 1Q22. The net income was $68.2 million this quarter.
- Solid Gold production this quarter with 122,918 Au Oz, up significantly from 1Q22. The company sold 118,455 Au Oz at a gold price of $1,899 per ounce.
- The Media Luna deposit is one substantial ongoing expansion for the company. The remaining CapEx is now $683.4 million.
- I recommend buying TORXF between $13.5 and $13, with possible lower support at $12.40 (200MA).
Introduction
The Toronto-based Torex Gold Resources Inc. ( TORXF ) owns the Morelos Gold property in Southern Mexico, comprising its El Limon Guajes mining complex - ELG for short - and the Media Luna deposit, where it holds 100% interest. It is called the Morelos Complex.
Note: This article is a quarterly update of my preceding article, published on December 16, 2022. I have followed TORXF on Seeking Alpha since March 2021.
TORXF Map Presentation (TORXF Presentation)
Note: The Media Luna deposit is one substantial ongoing expansion for the company. The remaining CapEx is now $683.4 million.
The Media Luna's first production is expected in 2024 . This production will be added to the 2024 outlook after the company releases the Media Luna Technical Report, which tripled the LOM to 11.75 years. The total project was 24% completed in 1Q23.
The mine will produce gold starting in 2025.
TORXF Media Luna Update 1Q23 (TORXF Presentation)
Torex Gold is a great miner with growth potential, with the Media Luna Project expected to be completed in 2024, with production starting in 2025.
TORXF has retraced significantly from its high recorded in early May, and I consider the stock attractive again.
The gold price has dropped recently after the FED indicated that it was not done with the interest rates and expected two more increases after the recent pause.
This more hawkish position than the Market anticipated has hurt the gold and gold miners. This trend may continue for another two quarters.
TORXF 1-Year Chart Gold, Silver, Copper (Fun Trading StockCharts)
1 - 1Q23 Results Snapshot
On May 10, 2023, the company released its first-quarter 2023 results.
The company posted revenue of $228.8 million , up 10.2% compared to the same quarter a year ago, with an income of $68.20 million , or $0.79 per diluted share.
Torex Gold produced 122,918 Au ounces in the quarter and sold 118,455 Au ounces.
CEO Jody Kuzenko said in the conference call:
we delivered record production of 123,000 ounces during the quarter, delivered by record throughput in the mill and another quarterly record established at ELG underground. The strong production performance underpins strong cost performance, with an average all-in sustaining cost margin of 42% delivered in the quarter. Adjusted EBITDA was $133 million, driven by a realized gold price of almost $1,900 per ounce.
2 - Stock Performance
The company's performance turned around in early November, as shown in a one-year basis chart. The stock is up 82% , outperforming the VanEck Vectors Gold Miners ETF ( GDX ).
TORXF - Financial Snapshot 1Q23 and Gold Production: The Raw Numbers
| Torex Gold |
| 1Q22 |
| 2Q22 |
| 3Q22 |
| 4Q22 |
| 1Q23 |
| Total Revenues $ million |
| 207.7 |
| 235.0 |
| 209.3 |
| 216.5 |
| 228.8 |
| Quarterly Earnings in $ million |
| 40.0 |
| 70.3 |
| 43.9 |
| 34.6 |
| 68.2 |
| EBITDA $ million |
| 102.8 |
| 156.3 |
| 128.7 |
| 100.3 |
| 105.7 |
| EPS (diluted) $ per share |
| 0.46 |
| 0.80 |
| 0.51 |
| 0.40 |
| 0.79 |
| Operating Cash Flow in $ million |
| 46.7 |
| 126.9 |
| 102.4 |
| 132.1 |
| 47.0 |
| CapEx in $ million |
| 65.3 |
| 52.5 |
| 68.6 |
| 91.2 |
| 99.7 |
| Free Cash Flow in $ million |
| -18.6 |
| 74.4 |
| 33.8 |
| 40.9 |
| -52.7 |
| Total Cash in $ million |
| 237.0 |
| 310.7 |
| 339.2 |
| 376.0 |
| 321.9 |
| Total LT Debt in $ million |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| Shares Outstanding (diluted) in million |
| 86.09 |
| 86.12 |
| 86.04 |
| 86.14 |
| 86.40 |
| TORXF Production |
| 1Q22 |
| 2Q22 |
| 3Q22 |
| 4Q22 |
| 1Q23 |
| Quarterly Production Oz |
| 112,446 |
| 123,185 |
| 122,208 |
| 116,196 |
| 122,918 |
| Gold Price in $/Oz |
| 1,876 |
| 1,865 |
| 1,715 |
| 1,784 |
| 1,899 |
| AISC in $/Oz |
| 1,034 |
| 911 |
| 1,059 |
| 1,034 |
| 1,079 |
Source: Company MD&A
Torex Gold Resources - Gold Production and Balance Sheet Details
1 - Revenues and Trends: Revenues were $228.80 million in 1Q23
TORXF Quarterly Revenue History (Fun Trading) Torex Gold posted $228.8 million in revenues this quarter compared with the $207.7 million indicated in 1Q22. The net income was $68.2 million this quarter from an income of $40.0 million last year. TORXF posted adjusted net earnings of $50.3 million or $0.58 per share on a diluted basis. Net income includes a net derivative loss of $26.6 million related to gold forward contracts entered into to mitigate downside price risk during the construction of the Media Luna Project. The adjusted EBITDA was $132.7 million in 1Q23. CEO Jody Kuzenko said in the conference call: we delivered another strong quarter which puts us on solid footing to achieve our production and cost guidance in 2023. Opening highlights include the site team. They delivered a strong production result driven by record throughput in the mill and another record quarter from our ELG underground. The project team made steady progress on the development of Media Luna, which continues to track to schedule and budget, and we also released our updated mineral reserve and resource statement in the quarter, which saw us replace the majority of reserves mined in 2022, as well as add materially to our resource base.
2 - Free Cash Flow was a loss of $52.7 million in 1Q23
TORXF Quarterly Free Cash Flow History (Fun Trading) Note: Generic free cash flow is the Cash from operations minus CapEx. Torex has a slightly different calculation and deducts the interest paid. Torex Gold indicated an FCF loss of $54.0 million in 1Q23.
Trailing 12-month free cash flow was $96.4 million , and the free cash flow for the first quarter was a loss of $52.7 million , contrasted with a gain of $40.9 million in the preceding quarter.
The company had a CapEx of $99.7 million in 1Q23, up from $65.3 million in 1Q22.
CFO Andrew Snowden said in the conference call:
The impact of these seasonal payments combined with increased spending on Media Luna resulted in negative free cash flow of $54 million in Q1. And with the elevated level of Media Luna Capital planned through the balance of 2023 and into the third half of 2024, we do expect free cash flow to continue to be negative over the next several quarters.
3 - Torex Gold's Excellent Position. The Company is Net Debt-free
TORXF Quarterly Cash versus Debt History (Fun Trading) Total Cash was $321.9 million at the end of March 2023 compared to $237.0 million in the same quarter a year ago. Available liquidity is $564 million in 1Q23. The company is debt free, which is a strong advantage. TORXF Balance Sheet (TORXF Presentation) TORXF Quarterly Gold Production History (Fun Trading) Solid Gold production this quarter with 122,918 Au Oz , up significantly from 1Q22. The company sold 118,455 Au Oz at a gold price of $1,899 per ounce. The first quarter of 2023 represents a strong start and puts the Company on track to meet annual production guidance of 440K to 470K ounces. TORXF Quarterly Gold Price Realized History (Fun Trading) One extra positive is that the AISC per ounce is $1,079 , which is reasonable. TORXF Quarterly AISC History (Fun Trading) 4 - Gold Production Details: TORXF Produced 122,918 Au Oz and Sold 118,455 Au Oz in 1Q23
CFO Andrew Snowden said in the conference call:
Q1 was another remarkable financial quarter for Torex. With a benefit of strong production and sales volume, record mill throughput, and a greater proportion of capitalized waste stripping, our reported total cash costs in the quarter were $709 per ounce, which was better than the lower end of the guided range for the year. Our all-in sustaining costs of $1,079 an ounce came in at the low end of the guided range, and supported the generation of $133 million of adjusted EBITDA in the quarter.
5 - 2022 Guidance - The Cost of the Media Luna Project is Expected to be lower
The company expects gold production of 440K to 470K AuEq ounces in 2023 at an AISC between $1080 and $1,130 per ounce .
The Media Luna Project CapEx totaled $66.4 million during the first quarter, with a remaining project spend of $683.4 million.
TORXF 2023 Guidance (TORXF Presentation June)
Technical Analysis (Short Term) And Commentary
TORXF TA Chart Short Term (Fun Trading StockCharts)
TORXF forms a descending channel pattern, with resistance at $15.4 and support at $13.2.
Descending channel patterns are short-term bearish in that a stock moves lower within a descending channel, but they often form within longer-term uptrends as continuation patterns. Higher prices usually follow The descending channel pattern but only after an upside penetration of the upper trend line.
The strategy is still the same. The short-term trading strategy is to trade LIFO about 50%-60% of your position and keep a core long-term amount for a much higher payday at around $19-$20.
I suggest selling LIFO between $15 and $15.6 , with possible higher resistance at $17.5 , and waiting for a retracement between $13.5 and $13 , with possible lower support at $12.40 (200MA).
TORXF could experience a breakdown if the gold price loses momentum and cross the $1,900 per ounce support. In this case, TORXF could retest the lower support at around $11 and lower.
Conversely, if the gold price trades back above $1,975-$2,050 per ounce in late 2023, TORXF could reach $18.75-$19.50 and eventually cross $20.
Thus, watch the gold price like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
For further details see:
Torex Gold: The Media Luna Project Is 24% Completed