Robust Q2: MMY Outshines Gold and Junior Miners

• MMY is up 103% YoY, significantly outperforming gold (up 35%), and the VanEck Junior Gold Miners ETF (up 42%), yet remains deeply undervalued at 1.0x forward EBITDA, compared to the sector average of 5.4x, an 83% discount.
• In Q2-FY2025 (ended December 2024), MMY produced 8.6 Koz from its 100% owned Selinsing gold mine in Malaysia, up 26% YoY, beating our estimate by 4%. Production growth came from higher grades and recoveries. While grade volatility is normal for miners, recoveries improved due to plant enhancements and optimization. As a result, we believe recoveries will likely exceed those of previous quarters going forward.
• Gross profit was up 67% YoY, and 4% QoQ, to $1,760/oz. Revenue was up 2% QoQ, and 80% YoY, beating our estimate by 13%, driven by higher production and gold prices. Although EBITDA was relatively flat QoQ, EPS improved due to FOREX gains from a stronger US$, exceeding our forecast by 42%.

• As of December 2024, MMY had $32M in working capital, with no debt.
• The company is planning a resource upgrade drill program this year aimed at potentially converting inferred to M&I resources. MMY has not engaged in exploration at its Murchison gold project in Australia lately, but management intends to start with historical resource confirmation drilling, and regional geological analysis.
• With gold trading near record highs, we anticipate an increase in M&A activity over the next 12 months, as larger companies target juniors to grow their portfolios. 
• We are raising our EPS estimates due to higher gold prices, and stronger-than-expected Q2 production.

Price Performance (1-year)

Portfolio Summary

Owns a producing gold mine in Malaysia, and exploration projects in Western Australia. Total compliant resources of over 1.2 Moz Au 

MMY has been processing sulphide materials since December 2022, with cumulative production exceeding 55 Koz by December 2024

Q2 production was up 26% YoY, and 7% QoQ, beating our estimate by 4%, driven by higher grades and recoveries

While grade volatility is normal for miners, recoveries improved due to plant enhancements, and optimization 

H1 production rose 19% YoY, driven by higher grades and recoveries

Q2 cash costs rose 3% YoY, and 10% QoQ, to $918/oz, exceeding our $875/oz estimate, due to higher royalties from increased gold prices

Despite higher cash costs, gross profit was up 67% YoY, and 4% QoQ, to $1,760/oz

With over 700 Koz of sulfide resources remaining, we believe the mine could produce up to 14 more years, with annual production expected to rise to 40 Koz from the previous five-year average of 12.5 Koz

Financials (Year-End: June 30th) 

Q2 revenue was up 2% QoQ, and 80% YoY, beating our estimate by 13%, driven by higher production and gold prices

Gross and EBITDA margins declined QoQ due to higher cash costs, but increased significantly YoY

Although EBITDA was relatively flat QoQ, EPS improved due to FOREX gains from a stronger US$, exceeding our forecast by 42%

EBITDA was up 160% YoY, with EPS turning positive, exceeding our forecast by 42

Strong balance sheet, with $32M in working capital, and no debt

FRC Projections and Valuation 

We are raising our EPS estimates due to higher gold prices, and stronger-than-expected Q2 production. Sector multiples are down 7% since our previous report in December 2024

MMY is trading at a 73% discount (previously 77%) to comparable junior gold miners. Applying sector multiples, we arrived at a fair value estimate of C$0.53/share (previously C$0.45/share) on the Selinsing mine

Valuation increased due to our higher revenue/EBITDA forecasts, partially offset by lower sector multiples

We are reiterating our BUY rating, and adjusting our fair value estimate from C$0.59 to C$0.68/share. MMY delivered another solid quarter of operational performance in Q2, primarily driven by higher grades and recoveries. While the stock has seen significant gains over the past 12 months, its valuation remains attractive compared to peers.

Risks

We believe the company is exposed to the following key risks:

• The value of the company is dependent on gold prices 
• FOREX
• Operational 
• Exploration and development 

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