Lim & Tan Securities analyst Chan En Jie has initiated a “buy” call on CNMC Goldmine as he sees several upsides for the company on the back of higher gold prices.
“As a gold-mining company selling at the spot rate, CNMC is a direct beneficiary of rising prices for the precious metal,” Chan points out. As at his report, average gold prices have risen from US$1,960 per ounce in 2023 to US$2,266 per ounce in the first half of 2024 and closing at US$2,624 per ounce at the end of the year. As at Feb 6, gold is trading at around the US$2,860 mark per ounce.
Demand for gold rose in recent years due to its status as a safe-haven asset amid geopolitical tensions. Demand also increased on the back of central bank purchases, interest rate cuts and is seen as a hedge against inflation.
Chan also notes that CNMC’s net profit for its 1HFY2024 results ended June 31, 2024, surged by 160% y-o-y from higher gold prices. As such, the analyst continues to expect surging gold prices to contribute “significantly” towards CNMC’s bottom line.
On Jan 21, CNMC guided that it expects to report a “significant overall improvement” in its FY2024 net profit on a y-o-y basis. This was attributed to the higher revenue from the sale of gold and lead and zinc concentrate during the year. CNMC is expected to release its FY2024 results on or before Feb 28.
CNMC is also seeking to capitalise on the rising gold prices in 2025 with the expansion of its gold production capacity at Sokor Gold Field.
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“To extract more higher-grade gold ores, the company is building its second underground gold mining facility at Sokor and is expected to be completed in 2025,” Chan notes. “In addition, CNMC is expanding its carbon-in-leach (CIL) plant which will increase processing capacity by 60% to 800 tonnes of gold ore a day.”
Beyond gold, CNMC’s diversification into lead and zinc concentrates since 2023 provides an additional revenue stream to its bottom-line.
“The recent entry into a 10 year agreement to sell these base metals to a 3rd party commodities trader will provide long-term recurring income for CNMC. Contributions are substantial at about 35% of total revenues,” says Chan.
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The analyst has given an initial target price of 43 cents, which represents an upside of 38.7% to CNMC’s last-traded price of 31 cents as at his report dated Feb 6. The discounted cash flow (DCF)-based target price is pegged to a blend of 12 times CNMC’s FY2024 P/E of 12.1 times, around its peers’ average.
Shares in CNMC closed flat at 31 cents on Feb 6.
