Millennium Minerals delivers bumper net profit of $41.7M
Millennium Minerals (ASX: MOY) has reported an impressive after tax net profit of $41.7 million for the year ended 31 December 2013.
Cash flow generation was particularly impressive.
This
includes an unrealised derivative gain of $16.2 million related to the
company’s hedge book and an income tax benefit of $11.6 million.
Gross
profit was $22.5 million arising from gold sales and realised hedge
gains of $103.3 million and cost of sales of $80.8 million while
underlying profit before treasury, tax and finance costs was $17.9
million.
Cash flow was $30.4 million, which was used to repay a
total of $20.2 million in lease, debt and interest charges; and
approximately $19.1 million in investing activities relating to property
plant and equipment, security deposits, mineral exploration and
evaluation and mine development.
These activities were partially
funded by gross proceeds from an equity raising of $6.5 million, $1.7
million proceeds from leases and borrowings and cash at bank.
Earnings per share (post consolidation) was $0.19 per share based on net profit reported.
“Delivering
a maiden profit result in our first year of commercial production
represents a significant milestone for Millennium that reflects the
company’s strong focus on operating margins and sensible risk management
‐ at a time when the gold industry is experiencing very difficult
operating conditions,” managing director Brian Rear said.
Nullagine Gold Project
Millennium
had earlier this month updated the life-of-mine plan for its Nullagine
Gold Project in Western Australia’s Pilbara region, estimating that its
mining inventory now stands at 481,000 ounces of gold – including the
updated Ore Reserve of 465,000 contained ounces.
LOM mine level
cash flow is forecast at $171 million, NPV at $144 million at average
and average LOM sustaining cash costs at about $1,160 per ounce of gold.
FY2014
production is estimated at approximately 76,000 ounces at a C1 cash
cost of A$975/Oz and a sustaining cash cost of A$1140/Oz.
Millennium
noted the new LOM plan offers greater flexibility due to the recent
establishment of multiple ore sources and associated mining operations.
This should result in more uniform head grades, gold recovery and mill
throughput over the currently planned six year mine life.
The Ore
Reserve could be upgraded at the end of 2014 after completion of infill
drilling and Ore Reserve estimation for the Beatons Creek joint venture
and Au81 deposits.
The comp any has also secured a $7 million
subordinated working capital facility with its major shareholder the IMC
Group that is subordinated to the Senior Facility Agreement it
currently has with BNP Paribas and National Australia Bank and to the Finance Lease facility provided by NAB.
Analysis
That
Millennium Mineral has delivered a maiden net profit of $41.7 million
from the first year of commercial production at its Nullagine Project is
a testament to the project economics and highlights the undervaluation
of the company.
Even stripping out the unrealised gain
and income tax benefit, still provides an EPS of $0.049 and P/E of 2.0 x
historical earnings.
Given that the company’s market cap. is just circa $33 million, the under-valuation for Millennium is acute and significant.
