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Rambler Metals and Mining PLC: THE INVESTMENT CASE

Rambler Metals' expansion plans roll on

The gold and copper producer in Canada is in the throes of a big expansion programme
Rambler Metals' expansion plans roll on
INVESTMENT OVERVIEW: RMM The Big Picture
The group produces copper, gold and silver

As the name suggests, Rambler Metals & Mining plc (LON:RMM, CVE:RAB) just keeps on rolling.

The gold and copper producer in Canada is in the throes of a big expansion programme at its Ming mine on the Baie Verte Peninsula with the goal of tripling output over the next two years.

This process was kick started in April following a cash injection of £10.45mln but the total raised via warrants could lift that figure to £20.45mln.

The initial investment saw CEII, a mining-focused fund based in the Cayman Islands, subscribe for shares and now holds more than 72% of Rambler.

Revenues for its 2016 year (to end July) were US$30.4mln (US$34.6mln) and there was an operating loss of US$1.06mln (US$938,000 profit) and a pre-tax loss of US$15.2mln (US$13.6mln) after an impairment charge of US$11.3mln.

Last month the company said it expects a steady ramp-up in output from its Ming mine in 2017 as grades improve over the year.

Guidance is 350,000-400,000 tonnes of ore to be milled, which in a grade range of between 1.3 - 1.6% produces 5,100 – 5,800 tonnes of copper. That compares with 4,174 tonnes in 2016.

The Newfoundland-based miner has begun to open a new area at Ming called the Lower Footwall Zone and this will have a major impact on the year ahead.

Norman Williams, chief executive, said: "Calendar 2017 guidance will be the first full year of massive sulphide ore blending with the Lower Footwall Zone. 

“A key milestone for 2017, and the Phase II expansion plan, will be to reach full production at 1,250 metric tonnes per day (mtpd) by mid-calendar year."

As a result of exploiting the Lower Footwall Zone, in the first quarter of its 2017 year (to end October)  Rambler milled 20% more material at its Nugget pond facility compared to the same three months in the previous year.

The company maintained near record throughput rates at the mill - at 69,600 tonnes and both copper and gold recovery rates nudged up higher (96.5% and 65.9% respectively) compared to the preceding quarter, despite a small decline in the head grades of both.

1,619 ounces of saleable gold were produced  - 12% more than in the fourth quarter, but 12% less than the  1,844 ounces in the first quarter of last year.

Chief executive Norman Williams  told investors that  copper and gold recovery was in line with its plan as development into the Lower Footwall Zone progressed.

"Over the coming months, the company will continue its work to increase mill throughput to ensure that all existing infrastructure, at both the mine and mill, are fully optimised in conjunction with sustainable ore production from the LFZ," he said.

Following completion of the phase II expansion, Rambler will then advance engineering studies on ore pre-concentration (DMS) and shaft rehabilitation in a bid to further increase production to 2,000 mtpd, targeting saleable annual copper output of over 25 million pounds (known as phase III).

Rambler has also started a detailed study at Nugget Pond with a goal to increase gold recovery and production rate in the copper concentrator.

What the broker says

Cantor Fitzgerald has reiterated a 'buy' rating and raised its target price to 14p from 12p, as the miner benefits from higher copper prices.

The broker also updated its 2017 production forecasts after Rambler's major investor CEII Rambler recently injectied more than $8mln into the company, increasing its holding to 72% from 63%.

CEII Rambler made the further injection as it seeks to complete the Phase II development work at the Ming mine and build in further upside to the project through the evaluation of additional operational enhancements and exploration around the mine. 

"We set our new calendar year 2017 production within the guidance range at 5,500 tonnes of copper, rising to over 7,000 tonnes from calendar year 2018," Cantor analyst Asa Bridle said.  

"Operating costs are estimated at $1.73 per pound this year falling to $1.18 per pound next year versus our conservative copper price forecasts of $2.48 per pound for calendar year 2017 and $2.58 per pound for calendar year 2018."

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