Goldplat: Profitable, cash generative and with ambitious expansion plans

The past year has been one of considerable progress for Goldplat (LON:GDP). 

However this is yet to be reflected in the share price, which has fallen 22 per cent in the past 12 months. 

Annual results from the gold recovery specialist beat even the most optimistic forecasts, both in terms of profits and productivity, while its move into mainstream mining exploration appears to be progressing smoothly.

If chief executive Demetri Manolis is downhearted by the lacklustre market response to Goldplat’s exertions, he certainly didn’t show it when we meet. 

He remains upbeat and determined to get the company onto the next rung of the ladder. 

“We are very excited and pleased by the increase in productivity and profitability of the recovery operations, and the progress we have made regarding our three mining operations,” he reveals.

“We are exploring a number of avenues as we assess our potential to grow.

“We can always do a bit more, but it is not a major step change. We are looking for something greater than that.”

The target Manolis has in mind is gold production of 50,000 ounces per year in the medium term, and a JORC-compliant resource estimate from its three gold projects in Kenya, Burkina Faso and Ghana of half a million ounces by the middle of next year.

By his own admission, the South African business, which recycles mining by-products such woodchips, carbon and waste grease, is nearing maturity.

It has 50 per cent of this niche market, which accounted for 18,190 ounces of the company’s total production of 28,150 ounces of gold last year, and good relations with the major producers.  

One way to increase the production in South Africa might be to source by-products from Tanzania and export them.

In Ghana, the site of its other gold recovery operation, there are many more options. The company is already in discussions with the major miners of nearby Mali, Burkina Faso and Guinea.

It also has toll treatment agreements with Golden Star and Adamus Resources, which were a significant factor behind the 138 per cent rise in production in Ghana to almost 10,000 ounces.

“The Ghanaian operation performed extremely well - it doubled production and nearly doubled profits,” says Manolis. 

“It is a much younger operation than South African and there’s good potential for the operation to grow significantly.”

However, even if Ghana doubled its production again this year, it would still only push Goldplat’s total annual production to around 38,000 ounces – some 12,000 ounces short of its medium term goal.

This is why the group is keen to get into gold mining. 

However, Goldplat’s template for picking these projects is slightly different to the one used by the industry’s 600-pound gorillas.

For Goldplat, small is beautiful. It is looking for near- or in-production assets that big beasts ignore. These projects should be easy to mine, cheap to exploit and have some exploration upside.

The company’s Kilimapesa mine in Kenya is a case in point.  By any standards it is tiny with a JORC resource of just 129,000 ounces. 

But with the deposit open at depth and along strike, there is huge potential for expansion. 

As results from the latest drilling campaign are compiled so the JORC resource is expected to increase significantly. 

The company’s target is 500,000 ounces of gold, which gets Goldplat much closer to a total resource base of 1 million ounces.

Kilimapesa also has the potential to drive annual production close to the 50,000 ounce mark.

Initially it is expected to produce at a rate of 5,000 ounces, rising to 10,000 ounces at a cash cost of US$700 an ounce within a year of receiving its Kenyan mining licence.

Banka, its Ghanaian project, is in elephant country. It is 40 kilometres west of AngloGold’s giant Obuasi mine and 10 kilometres west of Newmont’s 14 million ounce Akyem deposit.

Goldplat, however, is targeting something a little more modest and hopes a 4,800 metre drilling campaign will take the resource to a JORC-compliant 300,000 ounces, from 207,000 currently.

While the Nyieme licence in Burkina Faso sits with a resource of just 57,000 ounces of gold, the recently-completed 3,100 metre drilling programme should lead to an upgrade by the middle of next year.

The company raised £5.5 million from investors last December, and was left with around £3 million at the end of June.

This ought to be more than enough to meet those drilling commitments, Manolis reveals. 

“We are not a company that needs to keep coming back to the market,” he adds, pointing to the fact that the business is in cash generation mode.

Goldplat is everything investors seem to be clamouring for in a junior resource play – it is profitable, in production and cash generative as well as having a smattering of blue-sky exploration.

Yet its bargain-basement valuation of 11.05 pence a share, or £18 million, makes a mockery of this. 

City research firm Edison’s base case valuation is 18.2 pence a share, while the company’s broker WH Ireland reckons Goldplat is worth 21 pence based on the recovery operations and Kilimapesa.

WHI analyst Tom Elder sums it up neatly when he says: “Goldplat is a compelling investment case on an asset, earnings and prospectivity basis.”