Anglo Asian Mining (LON:AAZ) BUY – Target price – 25p (from 21p) – Quarterly operations update
Kibo Mining (LON:KIBO) – Agreement on refundable costs
SolGold (LON:SOLG) – AGM resolutions allow issue of new stock to Newcrest
Anglo Asian Mining* (LON:AAZ) 19p, Mkt cap £21m – Quarterly operations update
BUY – Target price – 25p (from 21p)
• Total gold production Totalled 16.5koz (Q2/16: 19.7koz; Q3/15: 18.2koz) with lower output attributed to weaker agitation leaching plant processed grades.
• Heap leaching (HL) produced 5.5koz (Q2/16: 5.0koz; Q3/15: 6.4koz).
• Agitation leaching (AL) produced 9.9koz (Q2/16: 12.9koz; Q3/15: 11.8koz) from processing 160kt at 2.5g/t (Q2/16: 152kt at 3.59g/t).
• Flotation concentrate accounted for the remainder 1.1koz (Q2/16: 1.7koz).
• Copper production was 0.5kt (Q2/16: 0.5kt: Q3/15: 0.2kt) with a roughly 50/50 split between SART and flotation operations.
• Gold dore sales (ex PSA) Totalled 12.6koz at $1,332/oz (Q2/6: 15.7koz at $1,265/oz; Q3/15: 14.9koz at $1,123/oz).
• Concentrate sales (ex PSA) came in at 1.7kdmt generating $3.5m in by-product revenues (Q2/16: 1.6kdmt and $3.0m; Q3/15: 0.3kdmt and $0.7m)
• New SAG mill installed and is operational contributing to increased throughput during the quarter.
• Electric sub-station and overhead power lines construction is nearly completed with the connection of Gedabek operations to the national power grid expected by the end of Nov.
• Net debt reduced to $37.7m (h1/16: $40.8m) as the Company continued to reduce its outstanding ATB loan.
• Annual gold and copper production forecasts reiterated at 69-71koz and 1.7-2.1kt, respectively.
Conclusion: Quarterly production came in lower than our estimates for 18.5koz with a shortfall attributed to weaker processed grades at AL Gedabek plant. For the annual production to meet management guidance of 69-71koz this year we would expect higher throughput rates in Q4/16 helped by the operational second SAG mill and higher grades processed at the AL plant (c.3.1g/t assuming 69koz annual output level v 2.5g/t recorded in Q3/16).
We continue to rate the stock as a BUY with a revision in the target price reflecting a revision to long term USDGBP rate (1.3 from previously used 1.6) and no changes to our commodity price forecasts (2016/17: $1,271/$1,300 gold and $4,800/$5,000 copper).
(Dec year end) 2014 2015 2016E 2017E 2018E
Gold price US$/oz 1,267 1,161 1,271 1,300 1,300
Copper price $/t 6,828 5,505 4,799 5,000 5,500
Gold production koz 60.3 72.0 68.8 78.8 60.7
Gold dore sold (ex PSA) koz 50.6 63.9 56.1 63.9 45.1
Copper production (SART+FLO) kt 0.8 1.0 2.0 2.7 3.9
C1 cash costs (incl PSA) US$/oz 971 724 559 508 433
TCC (net of PSA) US$/oz 1,168 821 668 620 576
Revenue US$m 68.0 78.1 83.9 99.5 83.3
EBITDA US$m 10.1 18.7 31.6 37.5 23.2
PAT US$m -10.9 -7.4 2.8 8.4 0.9
Basic EPS USc -9.8 -6.6 2.5 7.5 0.8
FCF (CFO-Capex-Interest) US$m -6.9 3.4 15.6 16.9 20.6
EV/EBITDA 7.7 3.1 2.1 1.8 2.9
PER - - 9.3 3.1 29.5
Net Debt US$m 52.4 49.0 33.5 16.6 -4.1
ND/EBITDA 5.2 2.6 1.1 0.4 -0.2
Source: SP Angel, Company
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Kibo Mining (LON:KIBO) 9.1 pence, Mkt Cap £32.4m – Agreement on refundable costs
• Kibo Mining reports that, following meetings in China, it has agreed with SEPCO III that qualifying past expenditure on the Mbeya Coal to Power Project (MCPP) amounts to US$10.94m.
• On this basis, Kibo Mining will receive a refund of approximately US$ 5.5m (50%) from SEPCO III as its contribution to the development costs incurred to date.
• Kibo has already received an advance payment of US$1.8m and will receive the balance of US$3.67m on financial close of the MCPP.
Conclusion: The agreement on the refund for the MCPP not only provides Kibo Mining with additional funding but also serves to underline the effective working relationship it is establishing with SEPCO III, a major Chinese contractor in the power industry.
SolGold (LON:SOLG) 19p, Mkt Cap £235m – AGM resolutions allow issue of new stock to Newcrest
• SolGold report the results of its AGM held to approve the issuance of substantial new stock to Newcrest and other investors.
• The AGM approved the right for directors to subscribe or convert securities into a maximum of 6m new shares.
• The AGM also approved the issuance of 142,896,661 new shares to Newcrest International at US$16c/s (approx. 12p/s).
• A Special Business resolution was also approved allowing the “Directors to be empowered pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) for cash as if section 561(1) of the Act did not apply.”
• The Company will now move to settle the USD33 million raising with Newcrest International and Maxit Capital as announced on 26 September 2016, and will advise the market at the time of the issuance and allotment of the shares..
• There is no further update on BHP’s offer of $30m for 10% of the company’s equity at around US$22c/s and the potential offer by BHP for $275m of further funding for the project to earn into 70% of SolGold’s 85% interest in the Cascabel project in Ecuador.
• BHP’s proposal will attract substantial attention for the project from other copper miners and major mining companies.
• The two offers help to put Ecuador on the map from a mining perspective.
• Lundin Gold acquired the Fruta del Norte project in Ecuador in 2015 and plan to start construction of the US$669m project later this year with first production due in 2018. The project has a US$676m post-tax NPV @5% discountand a post tax IRR of 15.7% with a capital payback of 4.5 years.
• Ecuador is seen as one of the last largely unexplored parts of the Andean range with the potential to host large-scale copper and gold projects.
• If the geology of Ecuador proves to follow that seen in Chile and Peru then there should be rich pickings all round.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst visited the Cascabel project.