Millennium Minerals delivers bumper net profit of $41.7M
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.
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
Given that the company’s market cap. is just circa $33 million, the under-valuation for Millennium is acute and significant.
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