Vantage Gold (ASX:VGO) is in that rare category of South African gold miners, it has not had any labour unrest at its gold producing operations.
Despite this, there is a sense that Vantage has been tarred with the same brush and been overlooked in the market. It shouldn't be, here is why.
Institutional shareholders have seen the light, maintaining their holdings despite ups and downs.
Platinum Asset Mgt 23.0%
Asia Investment Management Serv. 26.0%
What is different about Vantage? Well for starters it can reel off a significant list of achievements that highlights execution of its business plan and the promise that is ahead.
Financial Metrics Snapshot
Receipts / Sales $11,543,000
Net profit of A$1,225,000
Positive operating cash flow: $1,963,000 (significant turnaround)
Capex was down to $1,694,000 against a quarterly average of A$2,627,000 (a 36% drop)
Positive cash flow of $269,000 before financing
A number of records were achieved in the quarter with tonnes milled and gold produced being the highest to date. Cash operating costs and all-in-sustaining costs were also reduced to their lowest levels this year.
The cost savings implemented in June, coupled with the relatively stable price of gold in South African currency terms, have also contributed to improved profitability.
This has had a positive impact on the company’s cash flow.
Underground development rates at Lily Mine have increased steadily in keeping with the company’s drive towards opening new stoping areas in order to provide greater underground mining flexibility.
This accelerated development rate will be some 60% higher than last year.
In addition, revised grade management procedures and the re-engineered mine layout has had the dual effect of improving ore body definition, increasing mining efficiencies and reducing mining dilution, thus raising head grades.
VGO’s gold production is currently being achieved at two gold mines.
The Lily Gold Mine
Gold produced in the September quarter was 6,326 ounces, compared to 4,641 ounces in the previous quarter and 5,486 in the March quarter.
Gold recoveries improved to 90% from 87% in the previous quarter.
Due to a combination of increased gold production and cost containment, cash operating costs for the quarter reduced to US$949 per oz and all-in sustaining costs were US$1,071 per oz.
Despite the improved operational performances, the mine requires further capital expenditure, mainly for additional trackless mining equipment, in order to bring it full production. Capital expenditure for the quarter was A$1.438 million.
Taylors mine
Gold produced in the Septmember quarter was 1,408 ounces, compared to 1,126 ounces the previous quarter.
Cash operating costs at Taylors reduced to US$1,312 per oz and all-in sustaining costs were US$1,378
per oz.
Capital expenditure was A$40,000 for the quarter
Metallurgical recoveries improved marginally to 51% after the first full quarter of operations in the dedicated CIL plant.
With the introduction of additional CIL tanks to improve leaching efficiency and better process controls to manage the effects of organic carbon (‘preg robbing’), it is anticipated that recoveries will improve further.
Mining and development remained on schedule as planned above 10 Level. Tonnes milled during the quarter continued to increase, however grades declined due to the mining of lower grade ore reserves and accumulations in old stoping areas.
Gold production for the quarter was, nevertheless, higher than previous quarters this year. Encouraging results from drilling and sampling to the west and east of the current mining area has led to development taking place in those extensions of the Taylors and French Bob ore bodies, respectively.
Now if all that looks promising, the overall gold production metrics from its gold operations are stronger:
- Record gold production of 7,733 oz (34% increase on the previous quarter)
- Average gold price received of A$1,465/oz (US$1,335/oz)
- Cash costs reduced to A$1,115/oz (US$1,015/oz), down 14%
- All-in Sustaining costs reduced to A$1,397/oz (US$1,271/oz), down 27%
- Cash operating profit increased to A$2,602,000 (414% up on previous quarter)
- Net profit rose to A$1,225,000 from a net loss the previous quarter
- Wages agreement implemented on 1st July 2013 as planned
Lumped in with the herd
So why is the Vantage in same mire as other gold stocks?
The general state of resources stocks worldwide, especially gold stocks and gold juniors. The recent labour unrest in South Africa. However, Vantage has not had any problems whatsoever.
Vantage has been hiding under a bushel and the story not told. Vantage has been overlooked by the market to date with the shares selling at relatively inexpensive fundamentals.
Analysis
Proactive Investors believes that production is now on a more solid footing and that production levels should be maintained in the December quarter.
They could increase to around 8,500 ounces in Q1 next year. Given the strong September quarter production metrics, it would follow that the company may be able to find funding that would provide a platform for further production growth in 2013.
Has Vantage been lumped in with other South African gold miners?
Absolutely, this may be set to change. For a miner with its fundamentals, a market cap. of circa $12 million is not only undemanding but underplaying the upside.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.