VSA Capital Mining Analyst Oliver O’Donnell caught up with DirectorsTalk for an exclusive interview to discuss Goldplat plc (LON:GDP)
Q1: Now, Goldplat announced today the successful commissioning of the first stage of the new processing plant at Kilimapesa, can you talk us through the highlights of today’s news?
A1: Yes, sure. So, the mining at Kilimapesa is slightly different to Goldplat’s other operations which are recovery operations and Kilimapesa is Goldplat’s only traditional mining operation, it has been running at a loss for the past few years but by spending about $2 million Goldplat are now hoping to turn it round. Today’s announcement shows that they’re well on track to do that, the first stage which has now been completed will run at 60 tonnes a day and will enable them to produce around 4,600 ounces in 2017, we’d previously estimated that they’d produce about 4,500 ounces so that’s marginally better than that. The second stage that they’ve now started work on is to include a crushing circuit and three additional leach tanks which will take them to 120 tonnes a day and the final stage is to add a second mill and three further leach tanks which will take them up to the designed capacity of 200 tonnes a day, that means that the mine will ultimately produce about 6,800 ounces a day. The 4,600 ounce rate will allow them to produce a modest profit and reverse those losses they’ve experienced in recent years so that’s obviously a key positive for the company.
Q2: With these changes in effect, what’s the impact on the wider group?
A2: Well, obviously, the wider group’s been performing strongly over the last 18 months and the losses at Kilimapesa have really been holding them back and whilst there isn’t necessarily a link operationally between the assets, the fact that the other operations in Ghana and South Africa turned their operating profits up £2.5 million last year whilst Kilimapesa lost £600,000 means that it’s really been holding the stock back. So, even just breaking-even would really allow quite a significant amount of value to be unlocked and that fact that Goldplat are now guiding to a small profit for this year, I think that’s really positive for Kilimapesa and for the wider group. It also allows management now to focus on other areas within the group once Kilimapesa is back running at a profitable run rate.
Q3: Now you talk about other projects, when can we expect to hear news on these?
A3: So, at the end of last year, at the Ghanaian operations, Goldplat announced that they’d completed a shotblast facility. Now, we expect that to mean that in Ghana the production’s going to go up quite significantly from about 7,000 ounces in 2016 up to 11,000 ounces in 2017, they produced around 3,000 ounces in the first quarter so they look like they’re well on track for that, even perhaps our estimate is slightly conservative. Whilst the Kilimapesa update is ongoing, they’ve now held back the addition of an extra elution column in Ghana and so longer term that’s going to add around 3,000 ounces of additional capacity in Ghana and we expect that to be constructed in 2018 so that benefit should be felt by 2019. So, there’s now sort of long-term trend to expanding group production to above 40,000 ounces which is a pretty good level for a small gold producer and South Africa, as well, now that’s running at a stable level, that should be about 23,000 ounces each year.
Q4: So, all in all, quite a bit of positive news from Goldplat plc?
A4: Yes, absolutely, and it still looks very cheap. I think on the current earnings, our forecasts for about £3 million worth of EBITDA for 2017 and so that implies that the stock is trading on a multiple of 2.7 times EV/EBITDA which is about half of its long-term average. So, with all this positive news coming out, that combined with such a low valuation I think makes the stock look really attractive.
