VSA Morning Miner, 04/08/20
NQ Minerals (LON:NQMI)
NQ Minerals (LON:NQMI) has released an update demonstrating strong progress since the commissioning of additional throughput capacity at the Hellyer operation in the last week of June. July was the first full month at the new 1.2mnpta run rate, in fact NQMI outperformed that achieving an annualised 1.25mntpa or 106.5kt resulting in record monthly lead concentrate of 4.1kt, strongly above the average Q2 2020 monthly output of 2.9kt. Zinc concentrate output of 1.5kt in July, was modestly higher than the 1.4kt Q2 2020 monthly average. Zinc prices at US$2,300/t are in fact flat YTD having recovered all of the Q1 2020 losses while lead prices are trading at US$1,867/t just 2.9% down YTD.
We have previously highlighted NQMI’s precious metals output and the potential for earnings enhancement in the current environment where gold has reached all time highs and silver prices are up 38% over the past six months. Gross gold output of 461oz in July and 89,854oz of silver ahead of processing and streaming cost represent a significant revenue driver for NQMI and with further production at the higher run rate expected in the balance of H2 2020 we expect NQMI to further benefit from increased precious metals output.
NQMI has achieved the key refinancing agreement which will reduce financing costs at the corporate level and is delivering on the operational ramp up. With an attractive product mix in the current price environment the YTD share price performance of -7% does not reflect the operational performance or positive progress at the corporate level, in our view.
We reiterate our Buy recommendation and target price of 22p/sh.
Oliver O'Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: oodonnell@vsacapital.com
Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: prenken@vsacapital.com
VSA Capital Research | T: +44 (0)20 3005 5000 | E: research@vsacapital.com
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