CNMC Goldmine Holdings Limited - Phillip Securities 2019-05-22: Ongoing Output Improvement

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CNMC GOLDMINE HOLDINGS LIMITED (SGX:5TP)

CNMC Goldmine Holdings Limited - Ongoing Output Improvement

• CNMC GOLDMINE HOLDINGS LIMITED (SGX:5TP)'s 1Q19 revenue and PATMI missed our expectation due to seasonality and lower ore grade.
• 1Q19 production well improved y-o-y but underperformed q-o-q.
• Most expansion plans are on track.
• We maintain our BUY recommendation with an unchanged Target Price of S$0.31.

The Positives

Steady y-o-y growth of production.

• In 1Q19, the fine gold production was 8,023oz, 4th high in history, with a 77.6% y-o-y growth.
• The respective utilisation rate of vat leach, heap leach, and carbon-in-leach (CIL) was 70% - 75%, 70%, and 100%+.
• Based on the production record over the past three years, the quarterly gold output from vat and heap leach averaged at 4,000oz. Hence, the revitalisation of production is driven by CIL, which will deliver a full year performance in FY19 (F19e: more than 20,000oz).

The Negatives

q-o-q production declined.

• 1Q19 fine gold output was 21.3% q-o-q lower due mainly to the short-lived halt in production resulting from the replacement of ore milling system and holiday and lower ore grade.
• Generally, 1Q production is the weakest in a year owing to seasonality. Therefore, we expect CNMC Goldmine to generate higher output figures for the rest quarters in FY19.

Outlook

• The expansion plan below enables CNMC Goldmine to boost production and lower operating costs further.
  • Build an additional gold de-absorption and smelting facility for CIL plant (boost operation efficiency).
  • Embark on underground mining* in FY19 (high-grade ore supply exclusively to CIL plant).
  • Establish a new flotation facility with a capacity of 500 tonnes/day to monetise other metals (silver, zinc, and lead) (Expect to commence operation and realise revenue by the end of 2019).
  • Install a power line for the entire Sokor field project (to substitute diesel as a source of supply for power generation, hence operating expenses will drop).
  • Consider doubling the capacity of the CIL plant.

Recommendation

• We maintain our BUY recommendation with an unchanged Target Price of S$0.31.

Chen Guangzhi Phillip Securities Research | https://www.stocksbnb.com/ 2019-05-22

SGX Stock Analyst Report BUY MAINTAIN BUY 0.310 SAME 0.310