Ann: Mineral Reserve & Resource Update August 201, page-30

re: Ann: Mineral Reserve & Resource Update Au... 1and2s,

I can easily cut MML a load of slack regarding their recent performance whilst undertaking a doubling of mine and mill capacity!

From the depths of 2008 until May 2011 they hit all their targets (and more) and gave holders a 20x capital gain. On top of that they returned US$38.344m to shareholders through dividends.

As for bottom-line financial results, the numbers are all on record:
FY09 OP margin was 66%, all-in costs were $266/oz.
FY10 OP margin was 72%, all-in costs were $299/oz.
FY11 OP margin was 74%, all-in costs were $281/oz.
FY12 OP margin was 58%, all-in costs were $792/oz

I calculate FY13 OP margin at c. 61% with all-in costs of $385/oz.

During this current expansion they have had to absorb the multiple impacts of:
- a shaft fire which forced them to process low-grade slimes
- tilting leach tanks
- a severe typhoon which damaged their haul road and hindered UG operations.
- earthquake
- financial failure of the company providing consultancy to their new mill.
and perhaps more importantly:
- a large amount of development ore which, by definition, presents a lower head grade to their mill.

In spite of that, they have upgraded the mine and mill (fairly closely to schedule) and now stand to begin their ramp-up to their new capacity target of 200kozpa from Co-O.

All this has been achieved without recourse to debt or new equity (other than the small current overdraft available for drawdown).

Their low costs are a matter of record and try as I might I have not managed to find other gold miners with similar attributes and potential growth in prospect.

In an earlier post you suggested that their 2nd mine (Bananghilig) was overdue. A brief check of MML announcements/presentations over many quarters will confirm that the company has never estimated a start-up of that project before FY2016 and furthermore they have reiterated that they will await the outcome of an independent feasibility study (and the results of the new Philippine mining law) before committing investment capital to that project.

As for the economics of Bananghilig, we will obviously need to await the FS outcome. But from the earlier company scoping study it looked highly profitable on the data then available.

The expectation was:
a throughput of 5mtpa at a grade of 1.6g/t and recovery of 80%. Cash costs were estimated at $565/oz (but obviously, G&A, sustaining Capex, D&A, Royalties would need to be added in order to arrive at all-in costs).

But irrespective of Bananghilig, on the new expanded Co-O operation, MML stand poised to deliver twice the production levels achieved in 2010/2011 at a gold price pretty close to the average PoG existing over that time period - yet the SP is now considerably lower. In my opinion, that provides a pretty good opportunity - which I have happily taken!!
CPDLC