Valentine Mine's Commissioning In 2025 Will Expand Gold Production

Key Takeaways

• Accelerated expansion and high-grade ore processing are poised to enhance production capacity, boost revenue growth, and improve net margins.
  
• Successful exploration and drilling programs aim to expand resources, supporting long-term growth and a potentially favorable re-rating of the stock.
  
• Challenges in production, refinancing concerns, and dependence on exploration success could impact Calibre Mining's financial stability and long-term revenue growth.

Catalysts

Engages in the exploration, development, and mining of gold properties.

• The commissioning of the Valentine Gold Mine, expected to yield first gold in Q2 2025, is anticipated to significantly contribute to production growth, potentially adding 50,000 to 100,000 ounces in 2025. This expansion is likely to boost revenue growth.
  
• Calibre's plans to increase Valentine's throughput from an initial 2.5 million tonnes per year to over 5 million tonnes per year ahead of the original timeline will position the company for enhanced production capacity. This acceleration could improve economies of scale and thus positively impact net margins.
  
• The 200,000 meter company-wide drilling program, the largest in Calibre's history, aims to expand mineral resources, particularly at the Valentine’s Frank Zone and Limon's VTEM gold corridor. Successful discoveries and resource expansions are projected to bolster future earnings.
  
• Ore control drilling results have shown a substantial improvement in gold grades at key pits, with the Leprechaun and Marathon pits seeing 30% and 47% higher gold content than previously reported. Processing higher grade material for longer is expected to boost revenue efficiency and enhance net margins.
  
• Exploration efforts are ongoing in under-explored areas such as Frank Zone and Sprite, with the potential to significantly expand the current resource base. This long-term growth strategy could lead to a substantial re-rating of the stock and a more favorable earnings outlook.

Calibre Mining Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Calibre Mining's revenue will grow by 24.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.9% today to 35.8% in 3 years time.
• Analysts expect earnings to reach $407.0 million (and earnings per share of $0.47) by about April 2028, up from $34.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.0x on those 2028 earnings, down from 58.5x today. This future PE is lower than the current PE for the CA Metals and Mining industry at 14.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.28%, as per the Simply Wall St company report.

Calibre Mining Future Earnings Per Share Growth

Risks

• The Valentine Gold Mine ramp-up to meet production expectations may face challenges, potentially delaying earnings and affecting revenue generation.
  
• Uncertainties around the refinancing of the Sprott Loan facility could lead to higher costs or unfavorable terms impacting financial stability and net margins.
  
• The major technical report slated for release after 2025 could reveal higher-than-expected costs or extended timelines for operations and exploration, potentially affecting future earnings and net margins.
  
• Seasonality and variability in production outputs, particularly in Nicaragua, could lead to fluctuations in expected revenue and earnings.
  
• Dependence on exploration success at Valentine for future resource expansion introduces potential resource risk, impacting long-term revenue growth and earnings predictability.

Valuation

• The analysts have a consensus price target of CA$3.926 for Calibre Mining based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$5.25, and the most bearish reporting a price target of just CA$3.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $407.0 million, and it would be trading on a PE ratio of 9.0x, assuming you use a discount rate of 7.3%.
• Given the current share price of CA$3.29, the analyst price target of CA$3.93 is 16.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.