Completion Of Valentine Gold Mine Will Position Company As Mid-Tier Producer By Q2 2025

Key Takeaways

• Improved ore tonnes in Nicaragua and Valentine Gold Mine completion are expected to significantly boost future revenue and earnings.
  
• Technical upgrades and increased focus aim to stabilize operations and enhance net margins.
  
• Operational and financial challenges, including production delays and cost overruns, may impact Calibre Mining’s revenue, earnings, and profit margins.

Catalysts

Engages in the exploration, development, and mining of gold properties in Nicaragua, the United States, and Canada.

• A significant improvement in ore tonnes at higher grades from Nicaragua is expected in Q4 2024, with a projected production increase to 70,000 to 80,000 ounces, which should positively impact revenue and earnings.
  
• The expected availability of approximately 30,000 ounces in stockpile at Limon for processing in 2025 provides a potential boost to future revenue and earnings.
  
• The projected completion of the Valentine Gold Mine with first gold in Q2 2025 introduces a new revenue stream and positions Calibre as a quality mid-tier producer, potentially enhancing revenue and earnings.
  
• Technical upgrades and increased leadership focus in Nicaragua aim to ensure delivery into revised production guidance, likely stabilizing operations and improving net margins.
  
• The extensive 130,000-meter drill program at the Valentine Gold Mine could unlock significant resource potential, potentially boosting future revenue and earnings beyond current projections.

Calibre Mining Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Calibre Mining's revenue will grow by 46.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.6% today to 52.2% in 3 years time.
• Analysts expect earnings to reach $874.1 million (and earnings per share of $0.99) by about February 2028, up from $30.1 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 3.9x on those 2028 earnings, down from 57.7x today. This future PE is lower than the current PE for the CA Metals and Mining industry at 12.9x.
• 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 7.5%, as per the Simply Wall St company report.

Calibre Mining Future Earnings Per Share Growth

Risks

• Production at the Limon Norte open pit mine deviated from plan due to mining progress issues, causing delays in delivering ore grades. This could negatively impact revenue and earnings.
  
• Historical artisanal mining activities at the Volcan Open Pit resulted in production being 20,000 ounces below budget for the year. This depletion could affect revenue and net margins.
  
• The Valentine's Gold Mine project has experienced cost overruns, with capital expenditures increasing by CAD 91 million, potentially impacting net margins and cash flow.
  
• Contractor performance issues at the Valentine project required additional resources to maintain the schedule, which could further strain financials and lead to increased costs that affect earnings.
  
• Revised production guidance for 2024 indicates an 18% decrease from initial expectations due to internal changes, which could affect revenue and profit margins.

Valuation

• The analysts have a consensus price target of CA$3.787 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 $1.7 billion, earnings will come to $874.1 million, and it would be trading on a PE ratio of 3.9x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of CA$2.93, the analyst price target of CA$3.79 is 22.6% 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.