CNMC Goldmine kept at ‘overweight’ with 43 cents target price by NRA Capital
16 May 2016, 01:56 pm
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SINGAPORE (May 16): NRA Capital has kept its “overweight” call on CNMC Goldmine Holdings but with higher target price of 43 cents, up by 0.5 cents, following the company’s 1Q earnings announced recently which exceeded expectations.

During the quarter, the company posted 133% y-o-y increase in earnings to US$4.57 million ($6.3 million). “We remain bullish on CNMC and maintain our view that the company is high return, low risk, as CNMC continues to benefit from the triple combination of higher output, higher selling prices and low costs,” states NRA Capital’s head of research Liu Jinshu in his May 16 note.

“Any new concession will be a positive icing on the cake, supported by a solid balance sheet of 8.8 cents per share of net cash, which translates into around one third of the current share price,” he adds.

The company now has the potential to reach 40,000 ounces per year in production this year, higher than his earlier forecast of 35,613 ounces. On a trailing 12-month basis, CNMC has already produced 31,963 ounces of gold.

However, the analyst prefers to remain conservative and keep his forecasts intact. “Transient factors such as weather and changes in ore quality can still affect near term output,” Liu explains.

Besides higher production, he also sees average selling prices recovering further, from US$1,093 per ounce in 4Q2015 to US$1,156 per ounce in 1Q2016. “Based on average gold price of US$1,253 per ounce from 1 April to 13 May, ASP may rise by another 8.3% in 2Q16. In our model, we continue to assume ASP of US$1,200 per ounce in 2016,” states Liu.

In addition, he sees the prospects of a new concession and a strong balance sheet that together makes for a “compelling case.” “Any such news will be a positive catalyst, especially when the company is well funded to take on such projects,” adds Liu.

CNMC shares closed 5.66% higher at 28 cents.

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