Broker Fox-Davies Capital is maintaining its ‘buy’ recommendation on Hambledon Mining (LON:HMB) following the latest drill results and news that the group’s AGM has approved a £9 million cash call announced in last month.
Mining analyst Peter Rose said: “On our estimates, the company badly need this cash injection. It should now be sufficiently funded to finance underground development and complete the drilling programme. However, by raising money well below our target price, they have managed to significantly reduce our target price.”
The group is issuing 227 million new shares at 4 pence each – as announced in mid-March – which has prompted Rose to lower the price target to 7.9 pence from 9.5 pence.
The new funds will bankroll the turnaround of the company’s Sekisovskoye gold-silver mine (Sekis) in Eastern Kazakhstan, which last year produced 24,000 ounces of the precious metal from its open pit operation.
Underground production is set to get underway towards the end of this year, so the gold grade and the cash costs should improve markedly.
Earlier this week, the company revealed the underground drilling programme on Sekis had yielded some encouraging early results.
Eight holes have been drilled for a total of 1,700 metres, which uncovered grades of 4.5 grams per tonne over 33 metres all the way up to 10.75 grams per tonne over an eight metre section. The longest section was 60.4 metres at a grade of 5.6 grams of the precious metal.
The data is the first from an 18 month programme over 25,000 metres designed to expand the resource base at Sekis, which stands at 2 million ounces of gold at a grade of 3.9 grams per tonne and 2.9 million ounces of silver.
Commenting on the drilling results, analyst Rose said the first set looks quite good. “Most holes had some very significant intercepts, particularly in terms of the length of the intercept which will lend itself to low cost bulk mining. Significantly, these intercepts also contained good gold grades. All in all, an encouraging start to the drilling programme.”
Right now Hambledon is a steady-state gold producer. It expects to produce between 24,000 and 26,000 ounces from the Sekis open-pit mine this year.
It is preparing to take the mine underground with an ambitious expansion programme which will see it almost double production to around 45,000 ounces next year and ultimately ramp-up to 100,000 ounce by 2016.