On today’s TSX Breakouts report, there are 69 stocks on the positive breakouts list (stocks with positive price momentum), and 10 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that appears on the positive breakouts list with the share price closing at a record high on Monday. The stock has a unanimous buy recommendation from seven analysts covering the company. The average one-year target price suggests there is nearly 27 per cent upside potential with several potential near-term catalysts that may drive the share price higher. In addition, the company has an impressive list of strong strategic partners.
The security highlighted today is Orla Mining Ltd. (OLA-T).
A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
The company
Orla is a gold exploration and development company with two 100-per-cent owned, core open pit projects - Camino Rojo Oxide gold project in Mexico and Cerro Quema gold project in Panama.
The company has an experienced leadership team and strong strategic partners.
Chairman Chuck Jeannes is the former president and chief executive officer of Goldcorp Inc. President and chief executive officer Jason Simpson was the previous chief operating officer of Torex Gold.
Major shareholders include Goldcorp Inc. with an ownership position of over 18 per cent, Pierre Lassonde, the chairman of Franco-Nevada Corp. and the former president of Newmont Mining Corp. with an ownership position exceeding 12 per cent, and Agnico Eagle Mines Ltd. owns over 9 per cent of the shares outstanding. Management and directors own over 5 per cent of the shares outstanding.
This year is anticipated to be an active year in terms of news that could propel the share price higher, in particular with its Camino Rojo project.
In the first half of 2020, permitting is expected to be finalized, a potential catalyst for the stock. Construction is expected to begin thereafter with production slated for mid-2021. Furthermore, management may unlock shareholder value if a layback agreement can be reached with the neighbouring property owner. An agreement would expand the project and increase its resources.
The Camino Rojo project has lower quartile operating costs (all-in sustaining costs estimated at US$576 per ounce), accessible infrastructure (water, power, roads), and average annual gold production of 97,000 ounces anticipated. Estimated total mineral reserves are 1.03-million ounces of gold and 20.1-million ounces of silver.
In October, the company secured a commitment letter involving lenders Pierre Lassonde, Agnico Eagle Mines limited and Trinity Capital for project financing of up to US$125-million.
Dividend policy
The company does not pay its shareholders a dividend.
Analysts’ recommendations
This small-cap stock with a market capitalization of $398-million is covered by seven analysts on the Street, and all seven analysts have buy recommendations.
The firms providing research coverage on the company are as follows in alphabetical order: BMO Nesbitt Burns CIBC World Markets, Cormark Securities, Paradigm Capital, Scotiabank, Stifel Canada, and TD Securities.
Revised recommendations
Earlier this month, TD’s Arun Lamba raised his target price to $3 from $2.50.
In December, Cormark’s Richard Gray tweaked his target price higher to $3.15 (the high on the Street) from $3.10.
Financial forecasts
The company is anticipated to be profitable (positive earnings per share) by 2022.
Valuation
Analysts commonly value the stock on a price-to-NAV (net asset value) multiple basis.
The average one-year target price is $2.71, implying the share price may appreciate nearly 27 per cent over the next 12 months. Individual target prices are as follows in numerical order: $2.20, two at $2.25, two at $3, $3.10 and $3.15.
Insider transaction activity
On Dec. 19 and Dec. 20, Mr. Lassonde purchased a total of 1.5-million shares at an average price per share of approximately $1.68. After these transactions, this account held over 20-million shares.
Chart watch
Year-to-date, the share price is up 7 per cent and the stock closed at a record high of $2.14 on Monday.
In terms of key resistance and support levels, the next major level of resistance is around $2.20. After that, there is a ceiling of resistance around $2.80. Looking at the downside, the stock price has strong technical support around $1.80, near its 50-day moving average (at $1.77).
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.