SINGAPORE (Mar 7): NRA Capital is reiterating its “overweight” rating on CNMC Goldmine with a lower fair value of 37.5 cents on expectations that processing of previously untapped primary ore will drive output higher.
See: CNMC to see better q-o-q results in spite of profit warning, says NRA
In a Wednesday report, analyst Liu Jinshu says the group’s new carbon-in-leach (CIL) plant is a game changer as it can process primary ore whereas the existing heap leaching and vat leaching facilities are more suited for processing oxidised ore.
By feeding the new CIL plant with ores of higher grades, the analyst expects that this will enable CNMC to drive production by more than 80% in 2018.
Since its completion in Nov 2017, the CIL plant has been processing low grade ore in equipment tests and regulatory audits.
The group is now ready test the CIL plant’s performance at higher utilisation rates using high grade ore.
Meanwhile, much of its Rixen remains untapped. CNMC has mined 6.24 million tonnes of ore from Rixen during 2012 to 2016 as well as 2 million tonnes of ore in 2017.
However, Rixen stretches for up to 2km to a depth of up to 200m in some parts. Therefore, significant parts of Rixen can still be mined for heap leaching.
“Hence, we can expect output in 1Q18 to be higher than that of 1Q17. Moreover, favourable gold price and FX movements since 1Q17 are supportive of better 1Q18 results,” says Liu.
To recap, CNMC on Feb 26 announced it reversed out of the red in 4Q17, posting earnings of US$1.3 million ($1.7 million) compared to a loss of US$1.9 million a year ago.
This brings FY17 earnings to US$2.8 million.
See: CNMC Goldmine swings back to profitability with 4Q earnings of US$1.3 mil
The group also has plans to build a flotation plant to process silver, lead and zinc bearing ore to contribute to its growth in 2019.
More importantly, trenching at Kelgold has yielded positive results and CNMC has formulated an exploration and drilling plan to ascertain gold resources.
“If successful, these resources will be reported in 2019 or earlier, thus extending forward visibility,” says Liu.
Meanwhile, the group on Jan 15 announced that it was seeking a dual primary listing on the Mainboard of the Stock Exchange of Hong Kong.
See: CNMC Goldmine seeks dual primary listing in Hong Kong
The analyst views this move as timely due to the improved liquidity, mitigating instances when substantial shareholder Ng Eng Tiong had to pare his stake from 8.3% to 6.75%, selling 6.4 million shares at 28.5 cents.
“On balance, we look forward to a turnaround in 2018 and rate CNMC Overweight (high average return / low average risk). Longer term, CNMC is supported by its competency in mining and its local knowledge to grow beyond the flagship Sokor mine,” says Liu.
As at 10.45am, shares in CNMC are trading 1 cent of 1.85% lower at 26 cents or 17.8 times FY18 earnings with a dividend yield of 1.85%.
