Taylor Dart’s New Seeking Alpha Article Timmins Gold – The Sum Of Its Parts
In a sector that’s been derailed over the past couple months, my goal has been to try and separate what’s being thrown out with the mining stock bathwater. Oftentimes, the relative strength of a stock compared to its sector can give clues as to whether it’s a laggard or a leader. Timmins Gold (TSX:TMM) is one of those companies and one of only 15 of the 250 miners I follow that is holding above its February highs. This prompted me to dig a little deeper on the company, and it’s hard to ignore the compelling valuation.
I am no stranger at all to Timmins Gold, as the company acquired one of my favorite gold projects in the world in early 2015. I was a shareholder of Newstrike Capital at the time, and Timmins Gold bought it out for $112 million USD. I felt that I was absolutely robbed, as my fair value for Newstrike at the time was closer to $180 million.
Timmins Gold is currently undergoing a transformation, as it has recently added quite a few heavy hitters to its management team. The technicals on the stock are better than the majority of other miners, as TMM makes new highs while most gold stocks are making new lows. Finally, the company is trading at a deep discount to my fair value for the stock, while it trades for the same value as its acquisition of Newstrike in 2015. This means either Ana Paula is being valued at less than what Timmins paid for it 2 years ago or the company’s other assets are being valued at zero. Given the fact that I feel Ana Paula was stolen from under the noses of Newstrike shareholders and is worth 50% more than they paid, this valuation is a little absurd.
Timmins Gold currently has 356 million shares outstanding and is trading for a share price of $0.60 CAD. This gives it a market capitalization of $213 million (CAD). In order for the company to move to fair value, the shares would need to nearly double to the $1.04 level. Given the fact that Timmins Gold will likely need to dilute its shares to raise money for Ana Paula, my fair valuation could come in near $0.85 – $0.88 depending on how the financing is done (shares issuance? royalties? debt?). Having said that, this is still a premium of 40% to the current share price. – READ MORE
As we can also see on the below chart, significant volume has come into the stock over the past week. We have seen 5% of the company’s shares trade hands over the past 6 trading days, and given that the share price is moving higher with this volume, it is looking like accumulation. I do not know how this pans out and have no interest in predicting what price will do next, but this is a setup that is hard to ignore.
1. Timmins Gold is undergoing a transformation with a planned name change and new senior management in place.
2. The company’s current valuation is giving little to no value for its world-class Ana Paula Project on the Guerrero Gold Belt.
3. My fair value for the Ana Paula Project is $180 million, yet Timmins Gold as a whole is being valued at less than this amount.