UBS Global Research 23 January 2019 Alacer Gold Corp 2019...

UBS Global Research
23 January 2019
Alacer Gold Corp
2019 guidance implies solid Sulfide ramp up

Alacer management announce 2019 production guidance
Alacer issued 2019 production guidance of 320-380koz at All-In-Sustaining Costs
(AISC) of US$675-725/oz. This guidance was stronger than our forecasts of 317koz for
2019. The stronger than expected production guidance indicates that management is
becoming more confident in the success of the Sulfide project. Robust production in
the month of Dec-18 has clearly continued. Alacer Gold's investment case rests on its
Sulfide Project which appears to us as in the process of being rapidly derisked. The
share price has begun to rerate but we think more is coming. The share price of
$3.07ps could rerate closer to our unrisked NPV of $4.30ps if the Sulfide project is
delivered as scheduled. Our annual FCF yield for 2019-20e is ~20-%+ and the mine has
a 20+ year life.

Summary of modelling changes
We have upgraded our FY19 production forecasts at both the Oxide and Sulfide
streams to 351koz from 317koz. This drives a 34% lift in our NPAT to US$90m. Our
NPV is lifted by 3% to $4.44ps.

Next Catalysts; financial result; quarterly production and costs
The 2018 financial result on the 5th of Feb-18 will not in our view be a material catalyst
as it will not include costs from the ramping Sulfide plant. Commercial production is
expected to be declared in early 2019 and would signal that the Sulfide plant is
delivering consistent production at acceptable costs. Performance at each quarterly
production report will then be key to gauge the consistency of the Sulfide plant from
both output and costs.

Valuation: $4.33ps (10% discount rate)
Target price of $4.00ps (was $3.70) set at 0.9x P/NPV to account for ramp up risk
which is diminishing.