[miningmx.com] — GOLD One International on Monday reported a pre-tax profit of $18m (R132m) for its 2010 financial year, well in excess of what most predicted the group – whose key operating asset has yet to reach full operational capacity – would achieve.
Most brokerages which follow the stock predicted a smaller profit and, in some instances, even a loss. However, the figure failed to spark a rally in the junior gold miner’s share.
The profit came courtesy of a continuing production ramp-up, which saw Gold One’s combined cash and capital costs come in well below the prevailing gold price at $914 per ounce, equating to a margin in excess of $300/oz.
Perth-based Hartley’s Limited as well as Investec Securities were among forecasters who underestimated Gold One’s profitability for the year, predicting pre-tax figures of A$10.9m and A$6.6m respectively (the Australian currency is trading at around parity with the US dollar).
“It was definitely a surprise to see the company posting a profit given that it’s still in ramp-up,’ said a Johannesburg-based analyst. “This is a good sign that these guys know exactly what they’re doing.’
Gold One CEO Neal Froneman said the ramp-up during the last two quarters of the year offered the company sufficient scale to make a mint out of the high gold price. Given that capital costs have already been spent, investors can expect substantial returns over the mine’s lifespan.
Gold One achieved output of 21,480 oz in the quarter, accounting for almost a third of its 66,445 oz production during 2010. The output target for 2011 is 120,000 oz, of which 25,000 oz will be delivered in the first quarter.
“We’ve missed our targets before, but we are confident we’ll achieve what we’ve set out to do in 2011,’ said Froneman.
He said Modder East is already operating at a production rate of 8,000 oz per month, equating to an annualised figure of 96,000 oz. This will go up further as more panels become operational at the mine.
“An increase of on-reef development meant that sufficient reserves had been opened up to support the planned production profile for a period in excess of six months, should no further development take place,’ the group said.
Froneman said the lacklustre performance of the group’s share price remained a disappointment. After the share touched a low of 159c during the third quarter of 2010, it surged to over 260c in the fourth quarter, only to lose ground slowly to 216c on Monday.
“I think the market wants to see sustainable delivery,’ said Froneman. “I guess it will take another two quarters of solid performance before we see some value returning.’
He said the proposed offloading of its Megamine project into Goliath Gold remained on track, with White Water Resources’ shareholders expected to receive circulars and vote on the transaction before the end of the quarter.
According to the proposal, Gold One will acquire a major shareholding in White Water Resources, to be renamed Goliath Gold, after which it will offload Megamine into the new entity.
