Stonecap Securities analyst Brian Szeto has kept his sector perform rating and $3.70 price target on Timmins Gold (TSE:TMM) (AMEX:TGD), after the gold miner reported "a solid quarter" Wednesday, which was generally in line with the investment dealer's expectations.
The gold miner, which generates funds from its San Francisco mine in Mexico, reported adjusted earnings of 8 cents per share in the fourth quarter - slightly above Stonecap's 6 cent forecast, but just below consensus estimates of 9 cents.
Cash flow per share for the quarter was 10 cents, beating Stonecap's view of 9 cents.
Szeto notes that the difference relative to its estimates appears to be due to lower-than-expected taxes paid during the quarter.
The company produced 24,556 ounces in the fourth quarter, with cash costs coming in at US$760 an ounce - versus Stonecap's estimate of US$750 an ounce - higher than third quarter cash costs, but below the first and second quarter cash costs last year.
Timmins previously announced its full year production outlook, which remained unchanged with a range of 125,000 to 130,000 ounces. But it also released yesterday cash cost guidance, which is expected to be between US$700 and $750 an ounce.
As at the end of the fourth quarter, the company had a cash balance of US$24.2 million, and remains fully drawn down on its US$18 million credit facility.
"The company continues to expect that it will completely pay off its US$18 million credit facility over the summer with cash on hand," Szeto notes.
"Finally, although we are conservatively assuming a slightly slower ramp up at La Chicharra, we still expect that the company will generate free cash flow in excess of US$50 million in 2013."
More than 77,700 metres were drilled next to the La Chicharra open pit gold mine last year, which is located 2 km west of the San Francisco pit.
The company's plan is to ramp up production to 32,000 tonnes per day, after completing the crushing expansion to 24,000 tpd in the fourth quarter.
Metal revenues increased to $40.6 million, from $35.5 million in the fourth quarter of 2011 as production and the average price of gold realized rose to $1,682 an ounce, from $1,621 an ounce.
The quarter marked an end to a year full of records, with 2012 revenues hitting a record $156.2 million. Profit from operations also hit a record $60.6 million last year.
Drilling in 2013 will take place until the end of May, with an updated reserve and resource update, together with a new mine plan, to be released by the end of the summer.
Casimir Capital's Stuart McDougall says Timmins' fourth quarter results missed his forecasts, but left his strong buy rating and target price of $4.25 per share unchanged.
"As for the quarterly miss itself, we are not surprised, given the aforementioned production results and hence, consider it a non-issue, given management's continued guidance for 125,000-130,000 oz at a cash cost of $700-$750/oz in 2013," McDougall explains.
Shares of Timmins were trading higher on Thursday, up 2 cents, at $2.88 this morning.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.