[miningmx.com] — AN IMMINENT rerating could add some spice to Gold One International’s lacklustre share price performance, following a promising production update by the company.
On Monday, the group said it was on track to exceed its first-quarter gold production target of 25,000 ounces, recording output of 18,154oz during January and February.
In November, Gold One made a production forecast of 120,000oz for 2011, stating output targets for the respective four quarters of 25,000oz, 28,000oz, 34,000oz and 33,000oz. Although the annual figure was 20% lower than earlier guidance of at least 150,000oz, the market for some time had been informed of ramp-up delays at the group’s flagship Modder East mine.
“The increase in gold output is a result of a continuous increase in the tonnage mined as well as an increase in recovered grades,’ read a Gold One statement. “A total of 47 panels (13 of which are in ledging phase) were being mined at the end of February 2011, compared to 40 panels at the beginning of 2011.’ The reef tonnes mined during January and February reflected a 15% and 26% increase respectively on December’s total.
Gold One’s share price has in recent times meandered close to both benchmark highs and lows. On Monday, it was trading at 259c, not far from an annual high of 264c achieved in December, but interrupted by a low of 214c at the end of January. Similarly, the December high was preceded by a low of 190c in October.
Gold One has often been criticised for missing targets. Its 2010 target had been revised several times, down from an original 100,000oz to 85,000oz in May following a five-week strike at Modder East. The company eventually achieved output of 66,445oz for the year, after further production ramp-up delays at Modder East.
Despite paying a maiden dividend on the back of achieving profitability earlier than most commentators predicted, analysts said Gold One’s shares would only start to make meaningful gains once the company met target on successive occasions.
“We see the stock as good value at current levels, with a rerating due as the company continues to hit its target,’ said Perth-based brokerage Hartleys in an analyst report dated February 28.
“If the company continues to hit its targets over the next couple of quarters, we could well see the shares re-rate, in our opinion,’ said RBC Capital Markets analyst Leon Esterhuizen in a February 15 report.
“A significant price catalyst could alter the share’s rating and result in a rally and renewed interest,’ said Imara SP Reid’s Percy Takunda in a March 10 report. “On the other hand, a production downgrade will be negative for the share price.’
Esterhuizen said that while the initial ramp-up was slower than planned, things were finally starting to come together and that the positive production momentum of the last few quarters would continue.
“The slow ramp-up was the result of a lack of development,’ he said. “Development rates have, however, steadily increased in the last couple of quarters and with the third raise line being developed we believe that the mine is now in a much better position, with many more points of attack available for mining.’
Gold One’s metallurgical plants also continued to perform well, with recoveries of 96% above planned levels.
Hartleys said the stock had room to rise to about A$0.52/share (around 360c), while Edison Investment Research said the stock carried a value of A$0.75/share (around 520c). Takunda, however, has a “hold’ recommendation on the company.
