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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.
An update last month from gold recovery and production company Goldplat (GDP) saw CEO Gerard Kisbey-Green emphasising “operational profitability achieved at all operations” and “good progress being made on our strategic objectives”. This has helped the shares up from just above 6p to a current 8p to buy, but the value and further progress potential suggest there could be much more to come - and soon!
The company has recovery operations for gold (though also silver and platinum group metals) from by-products of mining near Johannesburg in South Africa and in the free port of Tema in Ghana. It also has mining and exploration assets – particularly producing from Kilimapesa in Kenya and seeing exploration progress in Ghana where Ashanti Gold is earning-in. September-announced results saw it emphasised that now “Goldplat is executing the strategy of growth and diversification and expects continued improvements in production and profitability”.
This was reflected in operational results for the quarter ended 30th September 2017 – which showed gold equivalent production 12% higher than in the corresponding 2016 quarter at 10,227 ounces. Within this there were strong increases from South Africa and Kilimapesa, with Ghana weaker. However, it was emphasised on the latter that “good progress is being made in our efforts to grow production through sourcing material from West Africa and South America, and we expect commissioning of the elution plant scheduled to begin towards the end of December”.
Indeed, “good progress” was also noted in sourcing overall, including “with production rates at Kilimapesa now sustainable at planned levels for Stage 2, focus will be on cost reduction” as well as that “shortly following the end of the quarter, Ashanti Gold Corp announced encouraging progress on exploration work”.
House broker VSA Capital is looking for a pre-tax profit of £3.8 million on revenue of £37 million (based on $1,315 gold) for the company’s current year to 30th June feeding through to solid cash generation - last results already showing decent balance sheet support, including cash of £2.65 million. It bases a valuation on a 50/50 blend of NAV and 12 month forward EV/EBITDA multiple – and derives a 17p fair share price. We expect a continuing growing awareness of the potential value on offer here (the current market cap £13 million) - and particularly on the company continuing to demonstrate its operational progress.
There is also the potential of excitement from the company looking to significantly further expand, particularly primary mining, production. It notes “we have shown the discipline to manage our resources and consider investment opportunities with care; if we see compelling opportunities which require additional capital we will of course consider that also”.
There are of course the usual risks in this space including operational, commodity price and political (it, for example, noted “there are currently proposed changes in South Africa in relation to the ownership and operation of entities in the mining sector and we will monitor and assess how best to respond as the situation develops”).
However, we still consider Goldplat offers strong risk/reward value – and look for the recent upward move to continue into Christmas and beyond. This is a company doing well in the right sector for now. We initially target 11p (a prospective 10x price/earnings multiple) – and a more than 40% return from here.
The trade: At up to 8.5p, the stance is buy - the target to sell is 11p by Christmas.
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