MSA: Massive Q3 including $77M in OCF; Increasing Target Price
What you need to know:• Mineros reported Q3 financial and operational results that beat our estimates across the board.
• Revenue came in at $196.0M (+39% YoY) vs. our estimate of $175.6M while operating cashflow (after WC) came in at $77.3M vs. our estimate of $42.5M, led by the increased gold price.
• MSA maintained its production and cost guidance for 2025.
• We are increasing our target price based on the strong cashflow generated in the quarter and updated model assumptions.
Yesterday, after market close, Mineros S.A. (MSA:TSX, MINEROS:CL) reported its Q3 financial and operating results, which largely beat our expectations. The Company maintained its production and cost guidance, but reminded investors of the effect of the higher gold price on its artisanal mining operations. We are maintaining our BUY rating and increasing our target price to C$7.00/share (previously C$5.50/share) on MSA.
Financial & Operational Highlights
• Revenue for the quarter of $196.0M (+39% YoY) compared to our estimate of $175.6M. This was driven by the increased gold price, which was $3,464/oz in the quarter vs. our model at $3,200/oz, as well as slight production growth (54.9Koz, +2% YoY).
• Gross profit was $81.7M, with a gross margin of 42%, vs. our forecast of 35% and the 39% from Q3/24.
• Adjusted EBITDA was $90.3M (46% margin, +44% YoY), smashing our estimate of $61.5M. Operating cash flow (after WC) was reported at $77.3M (+44% YoY), beating our estimate of $42.5M, and the $53.8M reported in Q3/24. Net free cash flow was $62.4M vs. $38.8M last year.
• Net income for the quarter came in at $54.1M, or $0.18/share, vs. our estimate of $28.5M or $0.10/share.
• The Company paid dividends of $7.5M in Q3, and capital expenditures for the quarter totalled $16.2M for existing mines and exploration projects.
• Cash cost per ounce sold was $1,704/oz (+38% YoY), while AISC was $1,982/oz, vs. our expectations of $1,555/oz and $1,863/oz, respectively.
• MSA ended the quarter with $102.2M in cash while debt declined from $25.6M in Q2 to $17.6M in Q3. This also included the acquisition of the remaining interest in La Pepa.
Mineros is primarily engaged in the mining of gold, as well as in related activities pertaining to the mining industry in general, including the mining of precious metals, metallic or non-metallic mineral substances or hydrocarbons.
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