Polymetals Mining (ASX: PLY) is an Australian mining company focused on precious and base metal production.
The company has current production, positive cashflows and tenements including the 25% owned Drew Hill Project (White Dam Gold Mine) in South Australia with JV Partner Exco Resources (ASX: EXS) - currently in production; and the 100% owned Canbelego Project (Mt Boppy Gold Mine) in NSW which has an existing 87,000 ounce gold inventory.
Polymetals Mining eyes potential 55% increase in half year profit
Polymetals has raised its expected profit for the half year to December 2011 to $4.5 to $5.1 million, an increase of between 55% and 76%, with strong production, high commodity prices and an asset sale all contributing.
Polymetals Mining (ASX: PLY) has lifted its expected profit for the six months to December 2011 from the previous corresponding period.
The company expects net profit after tax to be in the range of $4.5-$5.1 million, compared to $2.9 million in the six months to December 2010.
This equates to an increase of 55% at the lower end of the range, up to 76% at the upper end.
These figures will be finalised when an audit review of the company’s results is completed this month.
Strong production from the White Dam gold mine operations in the six month period, along with associated strong commodity prices, contributed to the increase.
The sale of Polymetals’ Boorara assets for $3 million also contributed to the figure.
At the end of the December quarter 2011, Polymetals had cash reserves of $18 million, meaning the company is well funded for its operations in 2012.
White Dam operations
The White Dam mine is part of the Drew Hill Project, a joint venture between Polymetals and Exco Resources (ASX: EXS).
Polymetals recently announced an agreement to increase its ownership of Drew Hill to 50%, from 25%.
Mining at the Hannaford pit has concluded, with mining operations moved to the associated Vertigo project.
Importantly, under the recent agreement, Polymetals is entitled to a 50% stake in production from Vertigo.
Mining at Vertigo will extend operations at Drew Hill to June 2012, with processing to primarily use existing infrastructure, keeping capital expenditure low.
In order to supplement the associated decline in production from White Dam, Polymetals is focused on bringing its 100%-owned Mt Boppy Gold Mine into production in 2013 and is seeking near-production assets to expand its production base.
Analysis
Polymetals is developing a reputation for fast, low cost development, bringing White Dam from start of construction to first gold production in just 31 weeks.
White Dam has been in production since April 2010. Total production for the 2011 financial year was 87,400 ounces, which was 30% better than expected. A further 19,400 ounces was produced to the end of October.
To put the cash return into perspective, Polymetals' cash costs were $450 per ounce and the average gold price received was $1,280 per ounce. That’s a return of almost three times its cash costs.
Polymetals is fast tracking the Mt Boppy Gold Mine into production and has moved a step closer today to the recommencement of mining operations with the lodgement of the Development Application and Environmental Impact Statement with the New South Wales Government.
The company is in the process of completing a Feasibility Study, which is scheduled to be finalised in early 2012.
In 2011, Polymetals returned:
- EBITDA of $15.9m
- Net profit after tax of $8.4m
- Net cash flow of $13.5m
With a market capitalisation of $25 million and cash of $21 million (at Nov 2011) this provides an EV of just $4m for the company. This indicates Polymetals is significantly undervalued.
