Shares in Goldplat (LON:GDP) have enjoyed something of a mini-revival in recent weeks as the market begins to digest the implications of a series of recent positive operational updates.
On 4 September the company announced the installation of a new boiler at its gold recovery operation in South Africa and the commissioning of a new woodchip washplant.
Then in mid-September came news that a new mill had been commissioned at the same operation, along with a new pumping station and a new cyanide storage facility.
Finally, at the back end of the month Goldplat put out full-year financials which showed that for the second half of the year the company had returned to profitability, even though the figure for the overall year remained negative.
It all adds up to a remarkable turnaround for a company that looked to be in real difficulties after a key customer, South Africa’s well-known Rand Refinery, ran into difficulties back in 2014.
Apart from bullion refining, which remained unaffected, Rand had traditionally bought concentrate and gold-rich ashes and carbon from Goldplat, and with a history of almost unbroken service stretching back almost a hundred years, the idea that it would run into difficulties was not considered credible.
But it did, and Goldplat stumbled badly.
Gerard Kisbey-Green, originally appointed to the board to take on the chairman’s role, appraised the situation and realised that with certain management changes and additions, and some key strategic initiatives, solutions were at hand.
That precipitated a bout of musical chairs. Kisbey-Green assumed the role of chief executive, outgoing chairman Brian Moritz agreed to stay on for a while, while the incumbent chief executive and finance director , Ian Visagie, agreed to step back from his market-facing role to concentrate on managing the financials.
First and foremost, the single-refinery risk that had so undone the company in the past 12 months needed to be addressed
Because Goldplat specialises in recovering gold from discarded industrial equipment and other waste, its product line isn’t always as straightforward as the standard concentrate that many miners produced.
This meant that when Rand’s issues began, there wasn’t an obvious alternative to turn to.
But there is now.
The company drew upon its relationship with Aurubis Refinery in Germany, which has played a significant role in partially working off a backlog of Goldplat stock accumulated both by its South African operation and by its parallel operation in Ghana.
The problem remained cashflow as there was a 5-month pipeline to fill with Aurubis before cash began to flow, towards the end of the financial year.
Rand Refinery has now recovered its poise, is taking delivery of some material, and the two parties continue to seek ways to do mutually beneficial business together. But the pipeline with Aurubis will be kept open, and never again will Goldplat be in a position where it finds itself building up stock with nowhere to sell it.
That was step one.
Step two in the new strategic plan was to increase in-house elution capacity – not only to work through the backlog stock, but to enable Goldplat to capture more of the value chain in-house going forward and increase production flexibility.
Existing elution throughput of 1.5 tonnes per day was quickly increased to three tonnes per day by efficiency and utilisation improvements.
This was then further increased to five tonnes per day following the purchase and installation of a new electric boiler.
Commissioning of the first of three four-tonne elution columns acquired from DRD Gold later this year will increase the capacity to eight tonnes per day and along with the Aurubis refinery initiative will deplete the backlog stocks by end December 2015. Job done… for now.
All of this activity put something of a strain on working capital, but as a business with a long-standing track record of cash flow Goldplat was able to put into place various short term debt facilities to provide a safety net. Only the South African facility was partly drawn upon to acquire the elution plant.
And of that, Kisbey-Green is proud. “The company hasn’t raised any new capital since 2010,” he says. And he’s not minded to now, especially with the depressed share price. With operations turning cash flow positive once again and the bank facilities in place, he’ll have little need to.
Expansion at the company’s small Kilimapesa mine in Kenya is required and to this end capital investment through a third party is being sought as a first preference.
Kisbey-Green says that with Kilimapesa currently close to operational break-even, he would like to move to profitability and to retain the significant option value to the 670,000 ounce resource.
But in the immediate term he seems more interested in driving growth through a combination of recovery in the South African performance and expansion in West Africa through the Ghanaian operations.
He’s certainly built a firm foundation.