CNMC Goldmine Holdings Limited - NRA Capital Research 2018-03-06: Good As Gold Outlook For 2018 To 2019

CNMC Goldmine Holdings Limited - NRA Capital Research 2018-03-06: Good As Gold Outlook For 2018 To 2019 CNMC GOLDMINE HOLDINGS LIMITED SGX: 5TP

CNMC Goldmine Holdings Limited - Good As Gold Outlook For 2018 To 2019

    Processing of previously untapped primary ore to drive output higher.

    • CNMC Goldmine’s new 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.
    • Primary ore has higher grades of up to e.g. 9g/t at Rixen and 25g/t at New Discovery, Sokor. We estimate that CNMC can grow production by more than 80% in 2018 by feeding ore of grades 3.44g/t or higher into the CIL plant.

    Much of Rixen remains untapped.

    • CNMC has mined 6.24m tonnes (t) of ore from Rixen during 2012 to 2016. Based on a bulk density of 2.64t/m3, the mined ore is equivalent to volume of about 1.25km x 250m x10m, including an estimated 2m t of ore mined in 2017.
    • Conversely, Rixen stretches for up to 2km x up to 500m to a depth of up to 200m in some parts. Therefore, significant parts of Rixen can still be mined for heap leaching.

    Output could pick up in as early as 1Q18.

    • The CIL plant has been processing low grade ore in equipment tests and regulatory audits, since its completion in November 2017. The company now plans to test the performance of the CIL plant at higher utilization rates using high grade ore. 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.

    Kelgold concession may report JORC resources

    • For growth in 2019, CNMC has started looking at building a flotation plant to process silver, lead and zinc bearing ore. 
    • More importantly, trenching at Kelgold has yielded positive results and CNMC has formulated an exploration and drilling plan to ascertain JORC-compliant gold resources. If successful, these resources will be reported in 2019 or earlier, thus extending forward visibility.

    Key risks include costs and execution risk.

    • Due to limited data, the actual cost of CIL processing may vary significantly from forecasts. Execution risk exists in the form of availability of space, cost and safety conditions for the mining of ore to meet projected production.

    Dual listing in HK as a potential catalyst.

    • Substantial shareholder Mr. Ng Eng Tiong pared his stake from 8.3% to 6.75% (27.46m shares worth S$7.4m) in January 2018, selling 6.4m shares at an average price of S$0.285. Mr. Ng has been a shareholder since December 2006.
    • CNMC’s proposed dual primary listing in Hong Kong is timely as the improved liquidity will help to mitigate against such sales.
    • 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.

    Liu Jinshu NRA Capital Research | http://www.nracapital.com/ 2018-03-06
    SGX Stock Analyst Report OVERWEIGHT Maintain OVERWEIGHT 0.375 Down 0.380