Is Turquoise Hill (TRQ) a Value? Book Value at 4.0X Current PPS
Turquoise Hill Resources Ltd. (NYSE: TRQ), together with its subsidiaries, operates as a mining company. It is a subsidiary of Rio Tinto plc., the worlds second largest metals and mining company (market cap $43B). The company explores for copper, gold, and silver deposits. It primarily develops and operates the Oyu Tolgoi copper-gold mine located in southern Mongolia.
Current price $12.56/share
A look at the stock chart indicates a steady climb since November currently trading above it’s 50 and 200 DMA.
There are a few company stats that stand out immediately with TRQ:
Book Value $46.79/share
P/E ratio 6.76
Insiders own 50.79% of the outstanding shares and institutions hold 36.39%.
As of Q3 2020, YOY growth in quarterly revenue was 26.5% and YOY quarterly income was up 79.3%
Market cap $2.43B
2020 Operational highlights
Full year copper production of 149,631 tons vs original guidance range of 140,000 – 170,000 tons
Full year gold production of 181,858 ounces vs original guidance range of 120,000 – 150,000 ounces.
Oyu Tolgoi is expected to produce 160,000 to 180,000 tons of copper and 500,000 to 550,000 ounces of gold in concentrates in 2021 from processing of both open pit and underground development material.
That guidance, given today’s mineral pricing, could yield revenues of $2.19B for the current year. We don’t know 2020 revenues yet but revenues of $2.19B would be significantly higher than prior years.
TRQ is involved in a legal action involving its parent, Rio Tinto, the Mongolian government, and Pentwater Capital Management (a major shareholder). The lawsuit involves a capital raise and cost overruns at the Oyu Tolgoi mine.
Date Brokerage Action Rating Price Target
1/19/2021 Canaccord Genuity Boost Target Hold $14.00 ➝ $16.50.
1/11/2021 Scotiabank Boost Target Outperform $22.50 ➝ $27.00.
1/5/2021 BMO Capital Initiated Outperform
11/17/2020 TD Securities Boost Target Buy $17.50 ➝ $21.00.
Investors will want to follow the developments between the Mongolian Government and Rio Tinto (on TRQ’s behalf). If a path forward becomes evident in the dispute, we believe TRQ shares could move toward the book value.
In late November last year, we reported on Westwater Resources, Inc. (NASDAQ: WWR), a diversified energy materials development company, at $5.75 per share.
We wanted to update progress at the company since then. Firstly, the current share price is $8.44 (46% over our first report price).
In December WWR updated its graphite mining operations at Dorfner Anzaplan’s facilities near Amberg, Germany, as well as at facilities in Frankfort, Germany, Chicago, Illinois, and Buffalo, New York. This combined effort is expected to produce a total of more than 10 metric tons of three trademarked Westwater battery-grade graphite products: ULTRA-PMG™, ULTRA-CSPG™ and ULTRA-DEXDG™, which were previously produced at a bench scale.
This month, the company sold all its uranium mining assets to focus more fully on its graphite mining assets to enCore Energy Corp. of Vancouver, British Columbia. WWR didn’t get cash in the transaction but got an equity stake in encore and relief from some costs associated with its uranium mining operations. Perhaps most importantly, WWR gets out from under the $4M annual expense it had from uranium mining.
The company will hold a conference call to discuss its financial results for the year ended December 31, 2020, and the business outlook for the 2021 year. The conference call will be held on Tuesday, February 16, 2021 at 11:00 a.m.
US Gold (NASDAQ: USAU) is now bouncing off from the recent dip following our coverage on January 27th, 2021. US Gold announced a capital raise for operations during our coverage and traded as low as $10.76 and has now recovered to $12.45/share.
Our stance on commodities remains the same since late November. See our Fed Policy and Commodities as Inflationary Assets Report
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