Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
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@TornadoTony Thanks for a very useful explanation. So focusing on GEOs rather than just gold. FY2021 guidance is "Forecast total metal production for FY 2021 of 64,000 to 72,000 GEOs (FY 2020 actual production: 67,249 GEOs)"
In Feb-2021 Hardman & Co. pointed out "AAZ achieved an 8% shortfall versus the lower end of its 75k-80k GEOs production guidance in 2020" which IMHO given everything thrown at them is remarkable. Ref: Hardman Info @ https://www.hardmanandco.com/research/corporate-research/february-2021-investor-forum-2/
So FY2021 production guidance COMPARED to FY2020 actual achieved ranges from up 7% to down 5% over FY2021, which in retrospect makes todays market reaction overblown given it already knew 2020 production. What has changed is:
> mix of metals being produced to deliver the GEOs going forward into FY2021= less gold and more copper
> forward guidance for FY2021 is lower than FY2020 guidance, albeit actual 2020 production achieved is mid-range of FY2021 guidance
In summary AAZ are signalling flat GEOs in FY2021 guidance +7%/-5% compared to FY2020 actuals and indicating intent to bring forward more upside IF they can establish viability for shipping in ore from Vejnaly.
Perspective is everything and I still maintain AAZ as a growth stock with a bonus dividend.
AIMHO APR
The change from January was that an asset near the Gedabek mine is not being added to the mix. Instead they have a huge stock of copper ore in the open pit and want to process it while the copper price is rising. With 30% rises in copper and 14% increased production from a year ago that is a 42% increase in the copper income. Gold production has dropped and only partly off set by a rise in prices since H1 2020, but accounts for a greater share of the profit cake. The overall impact in GEOs then becomes marginal and they have stayed with the same target as late 2020. So for those following gold it looks disappointing, but for those seeing a huge copper stock pile of ore getting processed and out of the way its not looking so bad as the bottom line is still some good income for 2021.
@JTD I Concur since picking up a chunk of AAZ following the repatriation of the contested areas it looks like the market has now fully discounted any upside from that (back to 129p) and another chunk for good measure. Everything I have seen from AAZ to date implies well managed and communicated operational competence so I am getting the sense that management has dropped the ball and/or just stretched too thin to cover all that is going on.
Given what has been going on could not have been foreseen let alone planned for so this is not surprising, but a bit disappointing that Plan B could not be expressed more fully.
Still happy to hold, unfortunately no free funds to add down here.
ATB APR
Yes, some clarity, but the absence of much information on the restored areas and exploration leaves the option for a follow up RNS in the next week or two together with the optimism missing today's offering.
Holding back metal for sale accounts for the cash difference I think most everyone understands that, the real issue being pounced upon is the reduced production, hopefully they will find a way to increase through the year.
I, like I suppose everyone else, am disappointed with the lack of progress - I suspect they have taken their eye off the ball with all the other stuff that has occurred - they need to take care of the basics of maintaining production from existing operations. Processing stuff from Vejnaly or any other added ore is great but it shouldn't be a replacement for core production, ,else we get nowhere.
There are rail transport links not far from Vejnaly they go to Zubovka and then can travel up to Ganja which is in road transport range to the mine. The rate per tonne for what is 3 grams of gold has to be worth it. Hence an evaluation of the cost assessment. Lets assume its not worth doing as a base case and we have no surprise in that quarter.
We knew Q1 was slightly weaker as staff were still returning post war service up to mid-January. The company also explained from my memory that the underground mine was to have a high strip ratio in 2021 as they were interconnecting parts of the mine plan. Some areas have high gold ore grades and some do not but the underground is set up for a better years in 2022 and 2023.
The mine life is believed to be 8 years but this excludes all the acquired territories and many new mine areas that have just been explored to date. The Hardman analysis had a greater mine life. AAZ usually trades 8-10 PE during the year hence a trading range of 130-170p.
The company has opted to produce more copper as the price is high along with demand. The increase is 14% and copper prices may go higher in the coming year. As a consequence the overall GEO rate is similar to 2020 in the earnings data. I therefore believed that the company was at a good value in the mid 130's and today's discount is attractive.
AAZ is a good story for 2022. The RNS like all of AAZ communications could be improved. The prospects at AAZ are significant and it should not have surprised anyone that a lot of planning has to be done. The company then has to decide how fast they should develop, do they pursue on cash earned rate or do they borrow and expand aggressively. Both options need looking at and also gauging views of stakeholders.
Overall I see AAZ edging back up and trading 132-152 range and paying a decent divi.
On the plus side (2) ... PX just bounced smartly off support at 117p and was bought into. Hopefully cooler heads prevail.
ATB APR
On the plus side ...
> POG is definitely firming up @$1,745 although I am not expecting fireworks just consolidation
> POS is $25.5 and has recently broken out from its early Feb-21 downtrend now at $
> POC is $9,170 & has been consolidating for the last 7-8 weeks circa $8,800 to $9,100 and looks like it may have broken out
From todays RNS "The production guidance has been calculated using the following metal prices used for the 2021 budget:
- Gold: $1,650 per ounce
- Silver: $25 per ounce
- Copper: $8,700 per tonne"
@TornadoTony Agreed, but I wasn't expecting a production cut albeit relatively modest 5% to a not so modest 15% cut compared with FY2020 actual production as per todays RNS !
"Forecast gold production for FY 2021 of 48,000 to 54,000 ounces (FY 2020 actual production: 56,864 ounces of gold)"
Reading between the lines AAZ are being open and honest about the situation whilst laying out the worst case scenario for FY2021 with some indications about how they might address to loss of Ugur production but nothing definite at this point albeit some horizon scanning which is scant comfort for a producer.
(1) Possible for FY2021 "A recent visit to the Vejnaly contract area in Zangilan has identified some high grade ore stockpiles and the feasibility of transporting this ore to Gedabek for processing is being evaluated."
(2) and for FY2022 "We are looking forward to starting to reap the benefits of this exploration with production next year from Avshancli."
Hopefully some 'Plan B' updates involving Vejnaly ore processing sooner rather than later will restore some confidence.
ATB APR
Tornadotony
Are PE ratios that helpful when mine life is an issue?
Although production is similar to 2020, there is a possibility of a positive surprise with ore being trucked from previously occupied mine sites. They need a gold price of $1665 and silver at $25 for there 64--72k GEO annual target. The net money earned in the first quarter was just over $7M. If they make $28M over the year it would be £20M.At say 17p a share an 8 PE rate is 136p and at 10 times earnings we have 170p. I would expect the share to trade between that range until we get more news. I prefer the option of a potential positive surprise. Divi yield could be 4% or so.