SINGAPORE (Aug 18): Phillip Securities has downgraded CNMC Goldmine to “neutral” as 1H17 output has been a disappointment. Revenue and net profit missed the expectations of the research house due to a substantial drop in sales volume of gold resulting from lower ore grades.
In 1H17, the total sales volume of gold only arrived at 3,670 oz, compared to 17,079 oz in 1H16. The dive was attributed to substantial fall in ore grade. Though average realised selling price (ASP) increased to US$1,277/oz during the period from US$1,231/oz in 1H16, the group delivered an unsatisfactory performance.
“We cut our earnings forecast by 84.6% for FY17E but raise earning forecast by 17.7% for FY18e respectively. Similarly, we lower our TP to $0.29 from $0.44,” says analyst Chen Guangzhi in a Wednesday report.
Meanwhile, CNMC has been working on the Carbon-in-leach (CIL) project since 1Q17 and expects to complete its construction in mid November. Preliminary estimation of newly-added capacity will be 150,000 to 180,000 tonnes of ore processed.
CIL will enhance efficiency in extracting gold with maximum 30 ppt increase in recovery rate from the current average 65% at the existing heap leaching facilities.
At the moment, the group is speeding up the construction progress. For spots identified with higher ore grade, CNMC specifically plans to extract gold by using CIL.
As for the progress of the Pulai project, the group completed three drill holes in 2Q17, but the results failed to meet Geology Department’s expectations. For the KelGold project, soil sampling programme has been carried out since May and will last till August.
“We believe the low-grade situation could continue to late FY17 until the trial run of CIL plant,” says Chen, “Hence, the FY17 performance is expected to be the worst since 2012... From a long-term perspective, it is expected to create synergies from monetising on minerals from Pulai and KelGold.”
Still, the analyst is upbeat on gold prices and expect the current lacklustre production to recover in FY18.
As at 2.50am, shares in CNMC are trading at 27 cents.
