THE TORO COMPANY (TOE-AU: A$0.06) October 14,2015
David A. Talbot / (416) 350-3082 dtalbot@dundeecapitalmarkets.com
NEUTRAL, Speculative RiskDundee Target: A$0.09
Lilliana Paoletti / (416) 350-5090 lpaoletti@dundeecapitalmarkets.com
TOE-AU New Last
We continue to recommend Toro as a NEUTRAL and maintain our target priceRating -- Neutral
Target -- 0.09
Risk -- Spec.
Projected Return 41% 10%
Target/NAV multiple -- 0. 80x Corporate DCF 0.07 0.07
Cash & Investments 0.03 0.00
Debt 0.00 -0.01
Exploration & Unmodelled Resources 0.01 0.03
Total NAV 0.11 0.12
P/NAV 0.59x 0.67x
Company Data
Last Price $ 0.06
52-week Range $ 0.05 - $ 0.10
Market Cap ($MM) $ 120.3
Enterprise Value ($MM) $ 115.7
Shares Outstanding - Basic (MM) 2,004.2
Shares Outstanding - FD (MM) 2,133.2
Avg Volume - 100d (000 shares/day) 572.1
Cash ($MM) $ 22.9
Debt ($MM) $ 18.3
Working Capital ($MM) $ 11.7
Forecast 2013A 2014A 2015A LT
Spot (US$/lb) 43.8 33.9 35.9 65.0
Term (US$/lb) 58.2 50.2 46.8 65.0
Realized Prices (US$/lb) 0.0 0.0 0.0
Revenue ($MM) 0 0 0
EPS ($0.01) ($0.01) ($0.01)
P/E n/a n/a n/a
EBITDA ($MM) (4) (5) (19)
EV/EBITDA (32.4x) (23.7x) (6.2x)
Interest Coverage n/a n/a n/a OP CF ($MM) (3) (3) (2)
CF/share $0. 00 $0. 00 $0. 00 P/CF n/a n/a n/a
Capex ($MM) (0) (0) (0)
FCF ($MM) (2) (3) (2)
FCF Yield n/a n/a n/a
All Figures in A$ Unless Otherwise Noted
Source: FactSet, Company Reports, DCM
TOE-AU: Price/Volume Chart
Toro Energy Lim ited (TOE-AU)
Volume (Millions) Price (A UD)
at A$0.09. A 20% increase in resources and a ~3% boost in grade at Wiluna's first two deposits to be mined is positive. However, despite the improved resource - and Toro's stance as a well leveraged, advanced, permitted, long-life uranium developer with very capable management - what this project needs most is higher uranium prices. Toro Energy trades 0.59x P/NAV compared to developers at 0.39x and producers at 0.55x.V olume Toro Energy Limited
20
0
Jan-14 Jul-14 Jan-15 Jul-15
0.14
0.12
0.1
0.08
0.06
0.04
several R&D programs in order to enhance and optimize the process design, and the operating and capital cost structure for Wiluna. The updated resource estimate, as well as drilling results from Lake Maitland and Nowthanna, will be used to revise project economic projections in the coming months. The public
environmental review period for the Wiluna extension, comprising Millipede and Lake Maitland, is anticipated to begin this quarter and final negotiations
Source: Factset
Company Description
Toro Energy is an advanced developer and potentially mid- term uranium producer located in Western Australia (WA). Its flagship is the 100% owned Wiluna project. WA's first approved uranium mine, it has both State and Federal approvals as of Apr-13. Wiluna has a resource of 80.47 MM lbs U3O8 at 0.5% U3O8. We estimate production for 2018.
with Wiluna Traditional Owners are also planned.
Please see Disclosures and Disclaimers at the end of this report.
A division of Dundee Securities Ltd. Dundee Capital Markets is a registered trademark of Dundee Corporation, used under license.
Table 1: Centipede and Millipede change in resources
Centipede and Millipede, 500ppm cut-off
Category | Resource Update (Nov-14) | Resource Update (Oct-15) % Change | |||||||
Tonnage ('000s t) | U308 U308 Tonnage (ppm) (MM lbs) ('000s t) | U308 U308 Tonnage (ppm) (MM lbs) ('000s t) | U308 U308 (ppm) (MM lbs) | ||||||
Measured | 1,200 | 872 | 2.3 | 1,900 | 972 | 4.2 | 58% | 11% | 83% |
Indicated | 4,700 | 947 | 9.8 | 4,500 | 1,045 | 10.3 | -4% | 10% | 5% |
Inferred | 400 | 887 | 0.7 | 400 | 887 | 0.9 | 0% | 0% | 29% |
Total | 6,300 | 929 | 12.8 | 6,800 | 1,015 | 15.4 | 7.9% | 9.3% | 20.3% |
* both estimates used a lower cut-off of 200 ppm U3O8; may not add due to rounding
Centipede and Millipede, 200ppm cut-off
Category | Resource Update (Nov-14) | Resource Update (Oct-15) % Change | |||||||
Tonnage ('000s t) | U308 U308 Tonnage (ppm) (MM lbs) ('000s t) | U308 U308 Tonnage (ppm) (MM lbs) ('000s t) | U308 U308 (ppm) (MM lbs) | ||||||
Measured | 2900 | 551 | 3.5 | 4,900 | 579 | 6.2 | 69% | 5% | 77% |
Indicated | 12000 | 562 | 14.8 | 12,100 | 582 | 15.5 | 1% | 4% | 5% |
Inferred | 1900 | 382 | 1.6 | 2,700 | 382 | 2.3 | 42% | 0% | 44% |
Total | 16,800 | 540 | 19.9 | 19,700 | 554 | 24.0 | 17.3% | 2.6% | 20.6% |
* both estimates used a lower cut-off of 200 ppm U3O8; may not add due to rounding
Source: Company Reports
Figure 2: Centipede and Millipede drill plan
Source: Company Reports
Toro Energy (TOE-AU) | |||||
Rating | NEUTRAL | A$ Target | $0.09 | Shares O/S (MM) | 2,004.2 |
Risk* | Speculative | A$ Close | $0.06 | Fully Diluted Shares (MM) | 2,133.2 |
David A. Talbot, VP, Sr. Mining Analyst 12-month return 41% Basic Mkt. Capitalization ($MM) 128.3
PRODUCTION ESTIMATES (000 lbs) | |||||
Year-end June | 2017E | 2018E | 2019E | 2020E | 2021E |
Wiluna | 0 | 400 | 1,200 | 2,000 | 2,000 |
TOTAL | 0 | 400 | 1,200 | 2,000 | 2,000 |
TOTAL CASH COST ESTIMATES (excl. non-cash) (US$/lb) | |||||
Year-end June | 2017E | 2018E | 2019E | 2020E | 2021E |
Wiluna | 0.0 | 48.3 | 42.9 | 36.9 | 36.9 |
Wt. Avg. Total Cash Costs | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
URANIUM RESERVES & RESOURCES | |||||
Ownership | Tonnes Grade MM t % U3O8 | Cont U3O8 (MM lbs) 100% Basis TOE Share | |||
Proven and Probable Reserves | |||||
*The company has no current mineral reserves | |||||
Total Reserves | 0.0 | 0.00% | 0.0 | 0.0 | |
Measured and Indicated Resources | |||||
Centipede+Milli | 100% | 17.0 | 0.06% | 21.7 | 21.7 |
Lake Way | 100% | 10.3 | 0.05% | 12.3 | 12.3 |
Lake Maitland | 100% | 19.9 | 0.06% | 24.3 | 24.3 |
Dawson Hinkler Well | 100% | 8.4 | 0.03% | 6.2 | 6.2 |
0.0 | |||||
Total Measured and Indicated Resources | 55.6 | 0.05% | 64.5 | 64.5 | |
Inferred Resources | |||||
Centipede+Milli | 100% | 2.7 | 0.04% | 2.3 | 2.3 |
Dawson Hinkler Well | 100% | 5.2 | 0.03% | 3.2 | 3.2 |
Nowthanna | 100% | 11.9 | 0.04% | 10.5 | 10.5 |
Theseus | 100% | 6.3 | 0.05% | 6.9 | 6.9 |
Total Inferred Resources | 26.1 | 0.04% | 22.9 | 22.9 | |
TOTAL RESOURCES | 81.7 | 0.05% | 87.4 | 87.4 | |
Current Per Pound Metrics | TOE | Developer Peers | Prem./Disc. | ||
EV/lb (US$) Mkt Cap/lb (US$) | $1.32 $1.47 | 0.59 0.65 | 123% 126% | ||
dta l bot@dundeeca pi ta l ma rkets .com Enterprise Value ($MM) C$ 115.7
BALANCE SHEET (A$ MM) | ||||
Year-end June | 2012A | 2013A | 2014A | 2015A |
Assets: | 22.89 | |||
Cash & ST Investments | 12.81 | 11.24 | 7.15 | |
Other Current Assets | 0.43 | 0.60 | 0.23 | 1.10 |
Current Assets | 13.24 | 11.84 | 7.39 | 23.99 |
Mineral Properties | 83.71 | 90.19 | 130.18 | 134.79 |
Other non-current Assets | 2.06 | 0.00 | 0.00 | 0.04 |
Total Assets | 99.02 | 102.04 | 137.56 | 158.82 |
Liabilities: | ||||
Current Liabilities | 3.40 | 1.50 | 0.81 | 12.26 |
Long-term Debt | 0.00 | 7.82 | 9.39 | 7.36 |
Other non-current Liabilities | 0.18 | 0.08 | 0.05 | 0.04 |
Total Liabilities | 3.58 | 9.41 | 10.24 | 19.66 |
Capital Stock | 220.92 | 224.41 | 266.51 | 300.15 |
Retained Earnings | (125.48) | (131.79) | (139.19) | (160.99) |
Total Shareholder Equity | 95.44 | 92.62 | 127.32 | 139.16 |
NET ASSET VALUE (A$) - 10% | NAV ($ MM) | /Share % NAV | ||
Assets: | ||||
Wiluna (100%) | 86.6 | 0.06 | 55% | |
Un-mined Resources | 18.6 | 0.01 | 12% | |
Balance Sheet & Other Items: | ||||
Cash & Investments | 43.4 | 0.03 | 28% | |
Debt | -5.4 | 0.00 | -3% | |
Exploration, G&A, and Other | 13.7 | 0.01 | 9% | |
Total | 156.9 | 0.11 | 100% | |
Dundee DCF Target Multiple | 0.80x | |||
Share Price Target | A$ | 0.09 | ||
Long Term Uranium Price Assumption (US$/l | b) | ||||
NAV (C$/share) | 40 | 50 | 60 | 70 | 80 |
0% Discount | -0.05 | 0.11 | 0.24 | 0.37 | 0.50 |
5% Discount | -0.03 | 0.06 | 0.14 | 0.22 | 0.29 |
10% Discount | -0.02 | 0.04 | 0.09 | 0.14 | 0.19 |
15% Discount | -0.02 | 0.03 | 0.06 | 0.09 | 0.13 |
1,500
30
1,000
20
MM lbs U3O8
US$/lb
INCOME STATEMENT (A$ MM) | ||||
Year-end June | 2012A | 2013A | 2014A | 2015A |
Total Revenue: | 0.9 | 0.3 | 0.4 | 0.5 |
% Uranium | 0% | 0% | 0% | 0% |
% Other | 100% | 100% | 100% | 100% |
Operating Costs | 0.0 | 0.0 | 0.0 | 0.0 |
G&A | 4.2 | 2.9 | 1.3 | 1.0 |
Exploration | 0.0 | 0.0 | 0.0 | 0.0 |
Depreciation | 0.7 | 0.5 | 0.8 | (0.7) |
Other | 6.7 | 3.8 | 4.0 | 19.4 |
EBITDA | (3.9) | (3.6) | (4.9) | (18.7) |
EBIT | (4.6) | (4.1) | (5.7) | (18.0) |
Interest Expense | 0.0 | 0.0 | (2.4) | (2.9) |
EBT | (10.7) | (6.9) | (8.1) | (22.2) |
Taxes | 0.0 | 0.0 | 0.0 | 1.3 |
Equity Earnings | 0.0 | 0.0 | 0.0 | 0.0 |
Other | 0.0 | 0.0 | 0.0 | 0.0 |
Net Income (Reported) | (10.7) | (6.9) | (8.1) | (20.9) |
Net Income (Adjusted) | (4.6) | (4.1) | (8.1) | (19.6) |
EPS (Reported) $/sh | (0.01) | (0.01) | (0.01) | (0.01) |
EPS (Adjusted) $/sh | (0.00) | (0.00) | (0.01) | (0.01) |
Average Shares (MM) | 983.8 | 858.1 | 1,216.0 | 1,448.7 |
CASH FLOW STATEMENT (A$ MM) | ||||
Year-end June | 2012A | 2013A | 2014A | 2015A |
Net Income (Reported) | (10.7) | (6.9) | (8.1) | (20.9) |
Depreciation | (0.7) | (0.5) | (0.8) | 0.7 |
Working Capital Changes | 0.0 | 0.0 | 0.0 | 0.0 |
Other | 9.2 | 4.7 | 6.3 | 18.1 |
Operating Cash Flow | (2.2) | (2.7) | (2.6) | (2.1) |
Operating Cash Flow/sh ($/sh) | 0.00 | 0.00 | 0.00 | 0.00 |
Capital Expenditures | (0.1) | (0.1) | (0.0) | (0.0) |
Acquisitions | 0.0 | 0.0 | 0.0 | (0.5) |
Other | (19.7) | (10.3) | (9.8) | 0.0 |
Investing Cash Flow | (19.8) | (10.4) | (9.8) | (0.5) |
Common Share Dividends | 0.0 | 0.0 | 0.0 | 0.0 |
Equity financing | 5.3 | 0.0 | 5.0 | 14.9 |
Debt Issue | 0.0 | 12.0 | 0.0 | 10.0 |
Debt Repayment | 0.0 | 0.0 | 0.0 | 0.0 |
Other | (0.1) | (0.5) | 3.3 | (0.5) |
Financing Cash Flow | 5.2 | 11.5 | 8.3 | 24.4 |
Net Change in Cash | (16.9) | (1.6) | (4.1) | 21.7 |
Cash Balance | 12.8 | 11.2 | 7.2 | 28.9 |
Free Cash Flow | (2.4) | (2.8) | (2.6) | (2.2) |
VALUATION DATA | ||||
Year-end June | 2012A | 2013A | 2014A | 2015A |
P/E | -- | -- | -- | -- |
P/CF | -- | -- | -- | -- |
EV/EBITDA | -- | -- | -- | -- |
FCF Yield | -- | -- | -- | -- |
COMMERCIAL URANIUM PRODUCTION PROFILE
3,000
60
2,500
50
2,000
40
500
10
0
0
INPUT PRICES | ||||
Year-end June | 2012A | 2013A | 2014A | 2015A |
Dundee Spot Uranium (US$/lb) | 51.9 | 43.8 | 33.9 | 35.9 |
Uranium Realized Price (US$/lb) | 0.0 | 0.0 | 0.0 | 0.0 |
Exchange (US$/A$) | 1.03 | 1.03 | 0.92 | 0.84 |
2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E
Wiluna
Cash Cost
Total Cash Cost
Source: Company Reports, FactSet, Dundee Capital Markets
Toro Energy Ltd.
Net Asset Valuation at Dundee Price Deck (US$)
Shares Outstanding (MM) 2,685.2
Target Setting NAV | |||
Discount Rate | ($MM) | ($/Share) | |
Uranium Assets Wiluna (100%) | 10% | 160 | 0.06 |
Total Uranium Assets | 160 | 0.06 | |
Other Assets & Expenses Cash Debt Resources Exploration, G&A, Other | 10% | 81 (10) 34 25 | 0.03 (0.00) 0.01 0.01 |
Net Other Assets | 130 | 0.05 | |
Net Asset Value Share Price P/NAV | 291 | 0.11 0.06 0.59x | |
NAV at Various Discount Rates | ||||
($MM) | 0% ($/Share) | ($MM) | 5% ($/Share) | 15% ($MM) ($/Share) |
942 | 0.35 | 421 | 0.16 | 20 0.01 |
942 | 0.35 | 421 | 0.16 | 20 0.01 |
81 | 0.03 | 81 | 0.03 | 81 0.03 |
(10) | -0.00 | (10) | -0.00 | (10) (0.00) |
34 | 0.01 | 34 | 0.01 | 34 0.01 |
(276) | -0.10 | (87) | -0.03 | 95 0.04 |
(171) | -0.06 | 18 | 0.01 | 200 0.07 |
771 | 0.29 0.06 0.22x | 438 | 0.16 0.06 0.39x | 220 0.08 0.06 0.78x |
Financial Forecasts at Dundee Price Deck (MM C$) | ||||||||
Cash and Debt | Operating Cash Flow and Capital Spending | |||||||
150 100 50 0 2012A 2014E 2016E 2018E -50 -100 -150 -200 Cash Total Debt Changes in Debt and Equity | 2020E | 100 50 0 2012A 2014E 2016E 2018E -50 -100 -150 -200 Operating Cash Flow (B4 Working Capital) Capex Free Cash Flow and Common Share Dividends | 2020E | |||||
160 | 2012A 2014E 2016E Equity Additions (incl. Dilutive Securities) | 2018E Debt Bor rowing | 2020E Debt Repayment | 100 | Adjusted Free Cash Flow (FCF - Capex) | Common Share Dividends | E | |
140 | ||||||||
120 | 50 | |||||||
100 | 0 | |||||||
80 | ||||||||
60 | -50 | |||||||
40 | -100 | |||||||
20 | ||||||||
0 | -150 | |||||||
-20 | ||||||||
-40 | -200 | |||||||
2012A 2014E 2016E | 2 | 018 | E 2020 |
Source: Company Reports, FactSet, Dundee Capital Markets
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Explanation of Recommendations and Risk Ratings Dundee target: represents the price target as required under IIROC Rule 3400. Valuation methodologies used in determining the price target(s) for the issuer(s) mentioned in this research report are contained in current and/or prior research. Dundee target N/A: a price target and/or NAV is not available if the analyst deems there are limited financial metrics upon which to base a reasonable valuation. Recommendations: BUY: Total returns expected to be materially better than the overall market with higher return expectations needed for more risky securities. NEUTRAL: Total returns expected to be in line with the overall market. SELL: Total returns expected to be materially lower than the overall market. TENDER: The analyst recommends tendering shares to a formal tender offer. UNDER REVIEW: The analyst will place the rating and/or target price Under Review when there is a significant material event with further information pending; and/or when the analyst determines it is necessary to await adequate information that could potentially lead to a re-evaluation of the rating, target price or forecast; and/or when coverage of a particular security is transferred from one analyst to another to give the new analyst time to reconfirm the rating, target price or forecast. Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonable liquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where the company's business and/or financial risk is high and is difficult to value. Venture: an early stage company where the business and/or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation.Investors should not deem the risk ratings to be a comprehensive account of all of the risks of a security. Investors are directed to read Dundee Capital Markets Research reports that contain a discussion of risks which is not meant to be a comprehensive account of all the risks. Investors are directed to read issuer filings which contain a discussion of risk factors specific to the company's business.
Medium and High Risk Ratings Methodology: Medium and High risk ratings are derived using a predetermined methodology based on liquidity and volatility. Analysts will have the discretion to raise but not lower the risk rating if it is deemed a higher risk rating is warranted. Risk in relation to forecasted price volatility is only one method of assessing the risk of a security and actual risk ratings could differ.
Securities with poor liquidity or high volatility are considered to be High risk. Liquidity and volatility are measured using the following methodology: a) Price Test: All securities with a price
price volatility. In order to avoid discriminating against smaller cap equities that have higher trading volumes, the risk rating will consider 12 month average trading volumes and if a company has traded >70% of its total shares outstanding it will be considered a liquid stock for the purpose of this test. c) Volatility Test: In this two step process, a stock's volatility and beta are compared against the diversified equity benchmark. Canadian equities are compared against the TSX while U.S. equities are compared against the S&P 500. Generally, if the volatility of a stock is 20% greater than its benchmark and the beta of the stock is higher than its sector beta, then the security will be considered a high risk security. Otherwise, the security will be deemed to be a medium risk security. Periodically, the equity risk ratings will be compared to downside risk metrics such as Value at Risk and Semi-Variance and appropriate adjustments may be made. All models used for assessing risk incorporate some element of subjectivity.
SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS (subordinate voting shares).73%
77%
66%
55%
44%
% of companies covered by Dundee Capital Markets in each rating category
% of companies within each rating category for which Dundee Capital Markets has provided investment banking services for a
33%
22%
11%
0%
27%
22%
14%
5%
0%
fee in the past 12 months.
Buy Neutral Sell
As at September 30, 2015 Source: Dundee Capital Markets
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