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Hi BillyBoy. I think it will be very tight. When I talked with the team after the AGM I got the impression the plans are 24k oz and 25koz. They haven’t done any where over 25koz for quite some time when they did actually achieved 30koz. I think this was actually using pretty much all ore from KE. So that is absolutely the top it could be. I would love them to post over 25koz but I wouldn’t bet on it. I think they could but that would mean them using more ore from KE instead of SW.
There are two dynamics at play I think. They need more KE to stay profitable and pay for Karoussa but that is at the expense of not depleting KW as they can only process circa 360kt of ore per quarter. They will want to deplete KW quickly to get the poor ore out of the way to make for a much better onward story at Yanfolila. So I think they will be doing a balancing game.
The good news is that if they do need the cash desperately they could now probably turn KE full on if they wanted too I think.
HUM have been exhausting the Sanioumale West (SW) pit, grades are 1.86g/t. This is due to be completed by H2 2023. They have been adding ore in from Gonka at 3.15g/t but I suspect that the excavator issue has prevented much new ore from Gonka being added in during H2. With little extra ore being excavated I believe that they have also been using ROM stockpile ore which is currently at 1.19 g/t to back fill which has diluted the ore grade again. Now all excavators are on site and operational that should improve. They are also going back to Komana East (KE) which has ore grade 2.99 g/t in H2. I think they are also reducing the SW operation but they won't want to reduce it to nil as they will want to use up this poor grade ore and get through its fast as possible..
My expectations are for 24kOz and ASIC of $1600 in Q3 and 25kOz and ASIC of $1500 for Q4. The ASIC might come in a bit lower if they have some cost savings due to fuel prices reducing and the sanctions lifting.
If they do a placing at these levels then we are talking about a massive dilution. It would only make sense if they had to raise circa £10M plus which would require a dilution of an extra 125M shares at these levels. That would be a disaster and seriously limit the potential upside to the share price! I would rather they seek alternative routes first to the finance if they need to.
Well if there is any positive to this RNS it has to be that they reported the results pretty much a month earlier than last year and really quick after Q2 results. So my take on that is that they wanted to get out the last of the bad news ASAP so maybe onwards and upwards from here.
Companies guidance of 87koz unchanged. They were confident of achieving this at AGM. I know you can question that given history and I am doubtful. But to do that they need to hit 25koz per quarter. Given costs may have peaked with oil prices declining then an increase in gold by 25% will reduce the ASIC by a similar amount which is circa $1500. Whilst not going to generate lots of cash hopefully it will be positive cash generation and not negative.
At the AGM they said that they are considering all options. They mentioned that a sale wouldn't be quick because of the necessary due diligence. I felt that they were honestly looking at what is the best to maximise shareholder return as opposed to doing something quick to get the company out of a hole.
I'm interested to know what people think about expectations for the earnings for Q2. I.e. what do people think Mr Market would consider the earnings to be ok and for the share price drop to stop and start a turn around. My own feeling is that HUM need to report at least 20 kOz with an ASIC less than the price they sold the gold for say $1800. What's everyones views?
That was pretty much my understanding on the VAT issue too. The only addition to make is that this I believe they said that reclaiming the VAT is built into the budget and required alongside Yan coming good in order to completely fund Karoussa. It is pretty much out of the companies control.
For what it's worth my take on what Q2 report might look is something like the following.
The FD said that they budgeted for the first half to be cash neutral with all the cash flows coming from the second half. He also said that Q1 was lower than expected. Implications are that they were expecting Q1 to be loss making (but not as much as it was) and Q2 to be cash producing and cancelling the loss. Q1 they produced, 15.5kOz with an ASIC of $2235. This implies a cost base of $35M roughly. They were down on ore processed 300,000 t compared to normal somewhere around 365,000t clearly due to the replacement bearing on the mill. Assuming that they have an increased throughput to normal figures and the same grade then we should see around 15.5 koz x 1.21 = 18.8 koz. With a cost base of $35M this would equate to an ASIC of $1860. My personal feeling is that this is the lower bound of what to expect in Q2.
The team were confident of meeting the guidance. So given that 87k is the minimum and I think realistic numbers for Q3 and Q4 are around the 24k and 25k oz levels then that leaves a number for Q2 of 22.5 koz, this would give an ASIC of around $1550. My feeling that this is an upper bound for Q2.
With the increased availability of the excavators in Q2 and it has been pretty much the whole of Q2 (since 8-10 weeks ago) then I would be hopeful of an increase in grade by virtue of the fact that they have more choice in what to process. AK said that they used to get a lower grade in the mill compared to modelling but that they are seeing a more predictable grade. He didn't confirm whether it was actually more or less than previous but that's not surprising given that would be market sensitive information. Any way a 10% increase in grade would take my lower bound expectations to 20.7koz at an ASIC of $1690.
So my hope for Q2 are for ozs greater than 20k and with an ASIC less than $1750.
Just to clarify. I don’t think they have given last years contractor the boot. I think they are referring to the change that happened earlier when the old contractor left. I can’t remember the timings but around Q1 last year I think.
According to the Q1 figures RNS, the company said. "The Q1 2022 grade profile was again relatively low primarily due to lower grade sections of the orebody accessed during the period and a run of mine ("ROM") pad not fully optimised to allow for more consistent better grade ore feed into the mill, resulting in lower grades being processed for the quarter"
Can anyone explain what a ROM pad does and why it needs optimising? I have tried to find out by googling but can't find any good references.