Get Set for Exciting 3Q Results
Intrinsic Value S$0.800
Prev Closing S$0.235
CNMC Goldmine Holdings Limited looks set to produce a very strong set of 3Q results, following announcements of record gold dore production of 1,360oz in Jul and 3,420oz in Sep 2013. In contrast, 1H 2013 gold production was only 2,073oz. CNMC’s share price of S$0.235 as at 28 Oct 2013 suggests that the market may yet to have fully priced in the growth in CNMC’s production.
What Do the Production Numbers Suggest? Assuming merely 1,000oz of gold dore output in Aug 2013, 3Q FY13 gold dore output may be more than 5,700oz (or about 5,200oz of gold, assuming 90% purity). Such production in turn translates to US$1.5m to US$2.6m of net profit for CNMC based on a per ounce net profit of US$300 to US$500. Conversely, CNMC’s net profit was US$0.1m in 2Q FY13, on 1,388oz of gold output.
There is some upside risk in the estimation of 3Q net profit as unit costs have most likely been driven lower by economies of scale.
3Q Performance Sustained into October: CNMC further reported recently that it produced 1,526oz of gold dore in a single gold pour in Oct 2013, suggesting that the strong performance in 3Q is being carried forward into 4Q. Our calculations indicate that CNMC need only produce another 3,350oz of gold in 4Q to meet our full year forecast of 12,000oz - an achievable target given recent output levels, but subject to weather considerations.
According to CNMC’s announcements, growth was driven by factors such as technical enhancements to the production process, more effective ore selection to yield higher grade ore for leaching and growth in operating leaching capacity.
Expect Further Production Growth: CNMC’s first leach pad of 70,000 tonnes of ore per leach cycle was commissioned on 30 Dec 2012. The second leach pad of 140,000 tonnes of ore per leach cycle commenced production in Sep 2013. A third leach pad of 70,000 tonnes per cycle is being constructed to achieve estimated leaching capacity of 1m tonnes of ore per annum.
Publish date: 29/10/13