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African gold producer Goldplat (LON:GDP) returned to profitability in the third quarter of its fiscal year.
The company said the trading performance in the first three months of 2014 was "highly encouraging", with its two gold recovery operations in South Africa and Ghana returning to the black.
Profit after tax in the third quarter was £313,000, following on from a half-year loss of £912,000, when gold prices were weaker.
Goldplat made an operational profit of £459,000 in the third quarter, which reduced the half year operational loss for the fiscal year-to-date to £235,000.
An improved gold price combined with a weaker South African rand versus US dollar exchange rate contributed to the stronger performance in South Africa, where the company is feeling the benefit of various efficiency initiatives, such as the introduction of a 24-hour shift for the by-product section at Goldplat Recovery Pty.
At Gold Recovery Ghana, the upturn is attributable to actions taken by management to mitigate the effects of the fluctuating price of gold.
The company remains confident it can expand its business substantially into the rest of Africa and further afield and continues to review other opportunities to grow its recovery operations.
The cash position decreased marginally from £634,000 as at 31 December 2013 to £568,000 as at 31 March 2014, but the company is confident that its cash position has and will continue to improve in the final quarter of the financial year, as the South African and Ghanaian operations profitability continues to strengthen in line with management's expectations.
With the company back operating profitably, it is allowing management to focus on expansion into West Africa and, in particular, the Burkina Faso Midas gold recovery operation.
Licensing issues at Burkina Faso have not yet been finalised but are in progress and the market will be updated in due course.
Anumso Gold in Ghana and Nyieme Gold remain low priorities at this stage, but Goldplat is continuing to evaluate opportunities to realise value or monetise these projects either through joint ventures or trade sales.
The company's broker, SP Angel, hailed a positive update from Goldplat, saying a number of initiatives being introduced by the team are having a positive impact.
"These include the 24 hour shift on by product treatment which has improved yields. Contracts have also been re-negotiated with clients in this area to improve the grade on material to be treated. Other projects are being investigated to grow the revenue stream including the re-treatment of their own tailings – a new tailings site is being sought and licensed which will free up capacity at the site," the broker noted.
Kilimapesa was the only disappointing aspect to an otherwise splendid update, with losses in Kenya running at a rate higher than SP Angel had been expecting.
"This is partially as a result of the company undertaking some development work to access sufficient ore. The company is said to be actively looking for JV [joint venture] partners to take the mine into commercial development – this includes funding a plant and undertaking further mine development. We look forward to hearing news on how these talks are progressing," the broker said.
"Overall we retain our numbers for the full year at the group operating profit level with an increase in losses at Kilimapesa offset by lower general & administrative expenses.
"Our earnings and profit after tax number are reduced to reflect interest costs impacted by the exchange rate. While cash is expected to be built up in the fourth quarter, we have reduced our assumption of cash at the year end from £1.7mln to £1.3mln," the broker revealed.
SP Angel has a 12p price target for Goldplat; the shares currently trade at 4.375p, down 0.125p.