Acacia Mining (LON:ACA) was given a boost on Wednesday as Jefferies and JP Morgan Cazenove raised the company’s target price following its full year earnings.
The FTSE 250 miner on Tuesday said it doubled its underlying earnings (EBITDA) to $415mln in 2016 on higher revenue and lower costs.
Revenue jumped 21% to $1.05bn, driven by a 13% increase in gold sales and a 7% rise in the price of the yellow metal. Gold production gained 13% to 829,705 ounces, bolstered by record output at the North Mara mine and an improvement at Bulyanhulu, which overcame an extended process plant shutdown in the third quarter.
The full year dividend was 10.4c, with a final dividend of 8.4c, compared to 4.2c in 2017.
Jefferies lifted its target price to 575p from 550p and reiterated a ‘buy’ rating on the stock, saying Acacia continues to deliver operational and financial improvements.
The broker said the company’s management have done an “exceptional job” in recent years in turning around what was once considered a “chronic underperformer”.
“ACA continues to be our top pick amongst UK peers and despite a strong recent run, the valuation is not stretched.”
JP Morgan also increased its target price on Acacia to 610p from 580p and maintained its ‘overweight’ rating, citing robust 2016 financial results. The bank said it expects the strong operational performance to continue into 2017.
Acacia’s chief executive Brad Gordon said the group expects 2017 to see further production growth and cost reductions. Production should be between 850,000-900,000 ounces at an AISC of between US$880-920 per ounce.
“We forecast this will drive margin growth to 41% (JPM base, fiscal year 2016 of 39%) and equate to a free cash flow yield of 6.5% which comfortably covers our forecast 2.2% dividend yield,” JP Morgan said.
Shares in Acacia rose 3.71% to 520.64p in morning trade.