Gold

Ground Breakers: All these gold quarterlies have got us in a spin

  • 11 producer quarterlies ranked from goodest to ‘don’t look down’
  • Eight gold miners and others on the bill with MinRes, Newcrest, St Barbara, West African among those reporting December performance

It’s quarterly season, in case you haven’t noticed lately.

We also have a public holiday tomorrow, you may have heard.

And so everyone is rolling out the numbers to get in ahead of the market close.

Take a look at this list: Newcrest Mining (ASX:NCM), Regis Resources (ASX:RRL), Ramelius Resources (ASX:RMS), Westgold Resources (ASX:WGX), St Barbara (ASX:SBM), Alkane Resources (ASX:ALK), West African Resources (ASX:WAF), Catalyst Metals (ASX:CYL) *BREATHE*, and in non-gold Mineral Resources (ASX:MIN), Iluka Resources (ASX:ILU) and Metals X (ASX:MLX).

In the words of the immortal Slick Rick – Heeeere we go.

 

The goodest

Once upon a time not long ago, when people wore pyjamas and lived life slow, things were simpler for a gold miner. Inflation was low, rates were near zero, costs were under control and share prices were at record highs.

That’s all changed over the last year or so. Rate rises have placed gold prices under pressure, a recent bull rally (US$1936/oz overnight) not withstanding, and labour, diesel and materials costs mean producers are seeing significant margin pressure.

It is a far-cry from the halcyon days of 2017-2020, when gold miners were some of the most profitable, high margin stocks out there.

There are a few still keeping the ship on an even keel. And some of the best numbers have come from players who’ve been playing at a high level already in recent years.

West African Resources (ASX:WAF) has followed its African peer Perseus (ASX:PRU) in hitting a high bar in 2022.

WAF produced 49,807oz of gold at the Sanbrado mine in Burkina Faso at costs of US$1286/oz in the December quarter, a healthy buffer to unhedged gold sales of 55,364oz at US$1758/oz, generating $64m in operating cashflow for a $25m tax instalment.

For the full year WAF produced 229,224oz at US$1086/oz, leaving the company with $173m of cash ahead of debt finance discussions for a US$300m package to build its new Kiaka mine, which would turn WAF into a two-mine, 400,000ozpa producer.

“In 2022, WAF met guidance for the second consecutive year, producing 229,224 gold ounces at below US$1100/oz,” executive chairman and CEO Richard Hyde said.

“This is an excellent effort by our team considering the political challenges encountered in Burkina Faso during 2022 and inflationary cost pressures experienced throughout the year.”

Closer to home Alkane Resources (ASX:ALK) followed on from its strong recent performance at the Tomingley mine in New South Wales, delivering 18,301oz at operating cash costs of $1103/oz and all in sustaining costs of $1323/oz, an almost $1300 AISC margin against sales of 17,855oz at a price of $2618/oz.

Alkane recently increased production guidance for FY23 from 55,000-60,000oz to 62,000-70,000oz at AISC of $1550-1800/oz, after exceeding guidance in FY22.

ALK, which is looking to extend its Tomingley project beyond 2030, with planning approval from the NSW Government expected in February, and drill out the large Boda and Kaiser porphyries.

A maiden resource at the latter is due in the March quarter, with $410m capped Alkane boasting $119.6m in cash, bullion and listed investments.

Outside of the world of gold, mineral sands are in high demand right now, and Iluka Resources (ASX:ILU) was so busy it sold out of zircon in 2022.

ILU produced 157,000t of zircon, rutile and synthetic rutile in the December quarter, in line with the previous quarter despite the demerger of the Sierra Rutile (ASX:SRX) business.

It sold 155,000t in the period, with weighted average prices of zircon in line with the previous quarter at US$2054/t, and rutile pricing up 1.6% to US$1681/t.

Across 2022 a 12.5% increase in unit costs to $1031/t and 12.2% increase in cash costs to $650.1m was offset by a 16.3% rise in revenue to $1.73 billion as higher prices covered lower production rates and sales volumes.

Meanwhile, bulk earthworks and ground improvement activities have progressed at the Eneabba Rare Earths Refinery in WA, with the project near Geraldton reaching financial close with the Australian Government’s Export Finance Australia and Iluka making use of the $1.25b loan for the first time in December.

Over the course of 2022 ILU’s net cash balance lifted from $295m to $489m. Its share price has tripled since the start of the pandemic.

 

The goodest share prices today:


 

The good-ish

Australia’s biggest gold miner Newcrest (ASX:NCM) will bolster production by 400,000oz over the next four years and 800,000oz over the life of mine of the Phase 14A gold expansion at the Lihir mine in PNG, after approving its implementation following a feasibility study released today.

Excluding sunk costs of US$71m, the project will deliver an internal rate of return of 48% with a capex of US$280m on a real basis and US$296m on a nominal basis and 2.9 year payback.

The expansion’s approval came off the back of a solid December quarter, in which Newcrest produced 512,000oz of gold and 35,000t of copper at all in sustaining costs of US$1082/oz, a margin of US$591/oz.

That was 3% lower than the prior period, but the company says it remains on track to deliver full year guidance of 2.1-2.4Moz of gold and 135,000-155,000t of copper in FY23.

So far in FY23, Newcrest has produced 1.039Moz of gold and 67,023t of copper at AISC of US$1089/oz against totals to this point in FY22 of 832,298oz and 50,945t at US$1190/oz.

Catalyst Metals (ASX:CYL), currently heading into a merger with Vango Mining (ASX:VAN) in a bid to make a district play on the 14Moz Plutonic gold field in WA, has reported a big improvement in its Henty mine in Tasmania.

Henty delivered 6793oz of gold at a realised gold price of $2637/oz and all in sustaining costs of $1997/oz in the December quarter.

That’s a big turnaround on 5923oz at costs of $2658/oz in the September term. CYL, which is also expecting a maiden gold resource soon at its Boyd’s Dam project in the Bendigo Goldfields of Victoria, had $18.6m in cash reserves at December 31.

Another gold miner on the hunt for a turnaround, Westgold Resources (ASX:WGX), saw its mine operating cash flow lift quarter on quarter from $3m in the three months to September 30 to $24m in December.

WGX, which had $159m of cash and liquid assets at the quarter’s close, produced 62,180oz at $2071/oz in the December term, tracking to the top end of half year guidance at 128,228oz at $2089/oz.

It expects to deliver 240,000-260,000oz in FY23 at $1900-2100/oz.

“In Q2, FY23 our operating discipline is improving, and our results demonstrate the rising operational efficiencies and increasing cost management. Critically our business is leaner, less complex and our largest mines are expanding rapidly,” MD Wayne Bramwell said.

“Going forward we are confident greater efficiencies will be realised.

“Our operating and commercial teams are working in unison to find
ways to safely expand production, lift productivity and drive our costs down.”

 

The Good-ish share prices today:


 

 

The mid

Mineral Resources (ASX:MIN) fell over 4% after hitting an all time high yesterday as Chris Ellison’s diversified miner reported lower prices for the lithium hydroxide and carbonate produced by third parties from its Wodgina spodumene and knocked down production guidance from its Mt Marion JV.

Mt Marion’s shipped guidance has been cut from 300-330,000t to 250-280,000t of spodumene at costs of $540-590/t (up from $460-510/t) after processing equipment delays and labour shortages pushed back its ramp up to a capacity of 900,000tpa.

Prices of US65,996/t for its chemicals revenue were also viewed as a miss by analysts. However, MinRes did see spodumene shipments lift 18% QoQ to 97,000t in the December quarter, with 7418t of attributable lithium hydroxide and carbonate converted and 6612t sold, up 75% QoQ.

Meanwhile lump sales from its Yilgarn iron ore mines helped MinRes surprise to the upside on its iron ore realisations.

Despite the lower grade nature of MinRes’ iron ore resources, it delivered realisations at 98% of the Platts 62% IODEX at US$97/dmt, well above consensus of US$75/t. Its lag time on payments has also been reduced from two months to one month.

The miner has also progressed early work on its $3 billion Onslow iron ore hub and yesterday secured the support of Norwest Energy (ASX:NWE) directors for a scrip takeover of its Perth Basin gas JV partner.

Regis Resources (ASX:RRL) says its guidance remains unchanged, though all in sustaining costs are forecast at the top end after producing 117,300oz at AISC of $1760/oz in the December quarter.

That was powered by its 30% stake in AngloGold’s Tropicana mine, which delivered 35,400oz at $1119/oz.

Regis’ 100% owned Duketon produced 81,900oz at $1760/oz. For FY23 it plans to deliver 450,000-500,000oz across both sites at $1525-1625/oz, weighted to the second half of 2022-23.

Inflation remains a big focus.

“The significant inflationary environment experienced in the September quarter continued in the December quarter, but we have seen some recent easing of pressure through reduction in the cost of diesel,” RRL MD Jim Beyer said.

“Despite this background of cost pressures, the planned increased production in the second half means we are anticipating our AISC unit costs to lower albeit to the top end of full year guidance, with efforts to contain costs continuing to be an important focus.”

Ramelius Resources (ASX:RMS) did the smart thing by getting the really bad news — its decision to dump an expansion of the Edna May gold mine on higher than expected costs — out of the way earlier this week.

We’re left with production for the December quarter of 56,756oz at expectedly high all in sustaining costs of $2153/oz.

But boss Mark Zeptner has pleaded patience, saying the introduction of ore from the ultra high grade Penny mine and its 7,000oz, $17m stockpile, as well as improvements in a truck driver shortage which impacted its haulage dependent operations in recent months are on the way.

RMS says its guidance for FY23 continues to be 240,000-280,000oz at $1070-1950/oz, with the introduction of the high grade Penny ore to reduce its AISC at the 150,000ozpa Mt Magnet operation.

Meanwhile, tin miner Metals X (ASX:MLX) saw cash outflows of $4.55m at its Renison Bell tin operation in Tasmania with all in sustaining costs of $31,617/t outstripping an imputed tin price of $28,307/t.

Renison produced 1925t on restricted mine production and low grades, though tin in concentrate was up on the September quarter from 1848t to 1925t. MLX shipped 1209t of tin in concentrate in the quarter, up from 810t in the September term, with cash and equivalents down from $117.5m to $113.9m at December 31 despite an imputed EBITDA of $16.31m (MLX share $8.2m).

It expects tin prices, which fell hard through the back end of 2022, to rise in early 2023.

“Global economic circumstances and ongoing lockdowns in China continued to affect the tin price for the first month of the December 2022 quarter,” the company said.

“Since early November 2022, the tin price has started to increase again, with long term forecasts now predicting a range around $22,000 to $26,000 USD per tonne (International Tin Association, CITI and Energy, Metals and Agriculture Forecasts).”

” 

Mid share prices today:


 

 

The ‘don’t look down’

What more can you say about St Barbara (ASX:SBM) and its recent performance, where it feels the ‘Hoover House’ reset can’t come soon enough.

That will see Raleigh Finlayson take the reins at the Gwalia gold mine in Leonora via a merger (also cf. reverse takeover) with his junior explorer Genesis Minerals (ASX:GMD).

While he won’t have the distraction of SBM’s underperforming Simberi and Atlantic operations in PNG and Canada, they’re being demerged into a new ASX company call Phonecian Metals, he’ll have a big job ahead of him to turn things around at Gwalia, the mine once operated by his uncles Chris and Peter Lalor.

It’s been a tough ride in the December quarter, prompting an almost 15% slide in SBM’s share price this morning.

SBM delivered 60,976oz at all in sustaining costs of $2666/oz, higher than its realised gold price of $2591/oz, with Leonora delivering just 32,175oz at $2796/oz.

St Barbara has maintained its guidance of 260,000-290,000oz, but warned costs will be at the upper end of its $2250-2500/oz range for 2022-23 and production at the lower end.

Like many other gold miners, the company says its second half will be better.

A conference call to explain the results was fraught with trouble as well, with the line routinely cutting out during a stop-start Q & A session.

“Maybe we haven’t paid the bills”, MD Dan Lougher joked at one point, the breakfasts of SBM investors presumably shifting uneasily in their stomachs.

Lougher said work was underway to improve the performance at Gwalia over the second half of the year, with access to high grade stopes delayed to January after Covid-19 absenteeism in 2022.

 

St Barbara (ASX:SBM) share prices today:


 

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