By Tom Winnifrith | Tuesday 5 September 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Tipped by ourselves in April, shares in precious metals miner and explorer in Kazakhstan Altyn (ALTN) initially performed reasonably, but subsequently slipped back – and currently even more so on the back of a half-year results announcement…
Firstly, this was released at 5:17pm – unhelpful and far from best practice. Secondly, it notes “production was affected by planned maintenance at the processing plant, this operationally closed the plant for three weeks in June”. From 4,289 ounces of gold production in Q1, the half year production was 7,327 ounces.
The financial result was an operating loss of $0.11 million on revenue of $9.2 million – though those comparing to -$1.34 million on $6.8 million in the corresponding 2016 period. On the balance sheet, a net current liabilities position was reduced by $1.81 million to $2.47 million over the half year, though somewhat offset by non-current liabilities increasing by $1.36 million to $17.77 million.
The liabilities positions include borrowings of $15.63 million, with cash down to $1.54 million. It is emphasised this is “sufficient for current operational requirements”, but noted “a further ramp-up to achieve the target of 40,000 tonnes - 45,000 tonnes a month (from the planned current level of 30,000 tonnes per month) requires further capital investment in underground mining plant and equipment”. As such, there’s “fund raising negotiations for acquisition of machinery for the project”.
We noted in the initial addition to the Gold portfolio that there was likely some further external financing required, but that the major shareholding Assaubayev family are very supportive and unlikely to want to be diluted at near the current price. We remain of this view – and note CEO Aidar Assaubayev’s comment that “the company is continuing to look at a number of options to service this need and hope to report back positively in Q4 2017”.
The announcement also reminds that, alongside production, a focus has been on continued development of the underground mine at Sekisovskoye and exploration work at the Karasuyskoye area – where extensive exploration was carried out at three sites, with results currently being analysed. However, with further investment and no further closures or maintenance works planned in the near future, “it is expected more significant revenues are to be generated from production towards the end of H2 2017”.
It’s all a bit behind where we hoped on the April recommendation – but we also noted then the real exciting net cash generation forecast for 2019 on production then rising towards 100,000 ounces. The latest announcement notes “continuing to progress towards its targeted production of one million tonnes of ore per year, to generate approximately 100,000 ounces per year” – and with ‘all-in sustaining cost’ by then expected to be down towards $600 per ounce and gold at circa $1,350+ (currently above $1,310 with signs of an upward trend), more than $50 million of annual net cash generation has been forecast.
This compares to a current market cap, with the shares at 1.40p, of sub £33 million (currently $43 million). As such, we continue to consider there potentially very compelling value indeed here. We imagine that the shares will zoom post the fund raising, especially if it is non-dilutive, and that the current gold price will fuel this re-rate. Thus, while this tip has not yet rewarded, for which we can but apologise, we still consider it will do so in spades. So treat the share price slippage as an opportunity. Buy.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve shortly and a new shorting piece from Lucian this week click HERE
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