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Goldplat plc: THE INVESTMENT CASE

Goldplat’s turnaround gathers pace

Goldplat's turnaround continues, as local currency weakness enhances the benefits of increased gold production
picture of gold bars
INVESTMENT OVERVIEW: GDP The Big Picture
Goldplat's gold production is on the up

The gold price has been rising of late, but it’s not just that putting a smile on Goldplat PLC (LON:GDP) chief executive Gerard Kisbey-Green’s face.

A week pound following the Brexit vote has also given the Africa-based gold recovery business a healthy profits boost.

The combined effect has been to send profits in the year to June just ended up to £2mln on revenues of £20mln.

As interim profit and sales were £395,000 and £10.7mln respectively and Goldplat made a loss of around £800,000 last year, it points to a stellar second half.

Indeed, the market consensus forecast was for the year was profit of £560,000 on revenue of £21mln.

The one wrinkle is an ongoing dispute with refiner Rand, which may see some gloss taken off the final numbers depending which way it goes.

Quiet recovery

Nonetheless, on this evidence it’s clear that Kisbey-Green has orchestrated a significant turnaround of the business since he took over last year.

In the first six months of the current financial year the company produced nearly 18,000 ounces of gold from two by-product recovery operations, one in South Africa and one in Ghana, with a small contribution also coming from a mine in Kenya.

That compares pretty well to the 24,900 ounces that the company produced across the entire 12 months prior and shows that the measures that Kisbey-Green is taking are having an effect.

Elution solution

The most significant of these has been the installation of what’s known as an elution column at the South African operation.

This effectively allows for the washing of the by-product materials in far greater volumes, and has increased capacity, according to Kisbey-Green, from around 1.5 tonnes per day to “in excess of 8 tonnes per day.”

“It allows us to capture a lot more of the value chain in-house,” he says. “The next step is to install one in Ghana.”

Broker VSA expects the new Ghanaian plant to make a contribution over the next couple of years.

Kilimapesa expansion

Expansion at the Kilimapesa gold mine in Kenya is also on the cards, as the interim production number of just 932 ounces of gold ranks it currently as a true tiddler.

And then there’s a newly established JORC resource of 82,000 ounces of gold with associated silver and uranium oxide at the South African operation.

Tailings opportunity

This material comes with certain complexities. Having previously been processed and then stockpiled as waste, it is by no means a homogenous body and the metallurgical challenges involved in the extraction of the metals could be significant.

On the other hand, as with all tailings projects, there are no mining costs to contend with, so even if there has to be some sacrifice of recoveries, margins could well come in at a very healthy level.

Work on that resource base will continue, but at this stage Kisbey-Green is talking of estimates from metallurgists and engineers that the company should be able to extract around 40% of the mineralisation before the capital intensity starts to look prohibitive.

“There’s quite a lot of work to be done,” he says. “That work begins now.”

Cash inflow

It’s helpful, of course, that this is a company that is generating cash and likely a lot of it given the strength of the second half performance.

The final figures will give a fuller picture but having spent around £600,000 in the first half of this financial year cash generated from selling the gold from South Africa, Ghana, and to a small extent Kenya should have been able to cover a similar amount in the second six months.

South America still an option

On a bigger scale, there are plans to expand into South America, although Kisbey-Green concedes that here things haven’t progressed as fast as he’d hoped.

Still, you can see the appeal. One small operation of just over 20,000 ounces a year, as the South African operation does, is fairly small potatoes. Add in Ghana, and there’s beginning to be scale.

With two or three more operations across the South American continent, production might suddenly rocket towards the 100,000 ounce mark, the traditional entry point into the ranks of the mid-tiers.

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Goldplat's turnaround continues, as local currency weakness enhances the benefits of increased gold production

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