Revenue nearly halved to US$4.7 million from US$8.5 million last year as lower ore grades crimped the group’s production and sales volume of fine gold.
See: CNMC Goldmine's 3Q earnings halve to US$1.1 mil on reduced output
In a Monday report, analyst Chen Guangzhi says that the group’s revenue missed the research house’s expectations due to a substantial drop in gold sales volume but net profit exceeded expectations due to the FX gain and tax credit.
The group managed to complete the construction of its carbon-in-leach (CIL) plant two weeks ahead of schedule, kicking off trial production of the plant on Nov 6.
Meanwhile, there were 18,000 tonnes of higher grade ore explicitly stockpiled for the ramp-up in operation, following the completion of a trial run.
The plant’s total capex came up to less than RM25 million ($8.12 million), which is substantially below the market expenditure of a similar capacity plant, as the group recycled some used materials without compromising the quality.
About 70% of the total costs has already been capitalised in the last two quarters, while the rest will be forked out in 4Q17.
Moving forward, the group will explore the Ketubong area which has never been mined previously. Any extracted ore will be processed by the group.
In addition, it plans to expand the exploration of the orebody towards the east in Sokor field, where 10 drill holes were completed in 3Q17.
In 4Q17, the group will also start studying on the lead-zinc orebody at Sg. Amang.
For the group’s Pulai project, it has completed nine drill holes at the northern anomaly of iron ore prospects in 3Q17, while conducting more geological works at Peninsula area where gold mineralised segments were observed.
As for the KelGold project, soil sampling was completed in 3Q17 with gold anomaly zone identified in Jeli area where trenching activities had been carrying out.
During the quarter, low ore grade issue protracted and is expected to remain status quo in 4Q17 though CIL plant is under trial operation.
“For the outlook in FY18, we believe the 18,000 tonnes of high-grade stock awaiting for CIL could boost the performance temporarily. However, solutions to improve the production volumes rely on either the ability to find high-grade ore beyond the existing fields that are being mined or monetisation of other minerals such as silver, zinc, lead, and iron ore,” says Chen.
Chen adds that acquiring other gold mines that are generating relatively stable income is another alternative.
He also expects that the group’s proceedings in various strategies so far will pay off in FY18.
As at 12.58pm, shares in CMNC Goldmine are trading at 28 cents or 2 times FY18e book with a dividend yield of 0.02%.
