[miningmx.com] — GOLD One International, often criticised for regular downward revisions of its production forecasts, on Tuesday nailed its colours to the mast for 2011, saying it will achieve gold output of 120,000 ounces next year.
Although the figure is 20% lower than earlier guidance of at least 150,000oz of gold production in 2011, the market has for some time been informed of ramp-up delays at the group’s flagship Modder East mine.
“We will be conservative going forward; we have nothing to lose by being cautious about what we will achieve,’ Gold One CEO Neal Froneman told Miningmx. “We will not miss (this) target.’
The forecast would be achieved, according to the company, by output targets for the respective four quarters of 25,000oz, 28,000oz, 34,000oz and 33,000oz.
Gold One’s target for 2010 has been revised several times, down from an original 100,0000z to 85,000oz in May following a five-week strike at Modder East.
After achieving production of 13,208oz in the first quarter, 12,287oz in the second and 19,470oz in the third, Gold One predicted output of between 20,000oz and 22,000oz for the final quarter, equating to full-year production of between 65,00oz and 67,000oz for 2010.
In October, RBC Capital Markets analyst Leon Esterhuizen said although Gold One continues to ramp up production and generate positive cash flows, the market was still disappointed by the constant pullback in guidance. “We reiterate our view that a rerating (of Gold One) will only be achieved once the company starts hitting its production and cost targets.’
This view was reiterated by Perth-based research firm Hartleys. “The ongoing production ramp-up will be crucial for market sentiment in terms of proving itself as a reliable low-cost producer,’ Hartleys said in a research note published after Gold One announced the updated forecast. “The company will need to hit each of its quarterly targets.’
Froneman said that although the projected jump in output from 67,000oz in 2010 to 120,000oz may seem like a big increase, the company is already operating at an annualised rate of 90,000oz, based on the group’s September performance.
He pointed to the continued build-up in mining panels at Modder East, saying the total area mined during November will be in excess of 7,000m2, an improvement of about 25% compared to the 5,660m2 mined in September.
Froneman also said the production ramp-up would be the only issue the group’s management would have to focus on in 2011, with no corporate issues due during the year. This year the group’s share price was under constant pressure over uncertainty about whether bondholders would exercise a once-off put option to the value of more than $65m. The group only managed to arrange a debt facility in September, after which all bondholders decided not to exercise the put option.
Besides updating its production forecast, Gold One also said its cash costs would amount to $417/oz during 2011, based on consensus broker views of R7.69/$. Its forecast for gold is $1,234/oz during the year.
Earnings for 2011 would come in at around $59m, or $0.07c per share. Based on the Gold One’s current share levels of about R2.40, the group would be trading at a price to earnings multiple of five.
