Conference call
Costs
¦ Management noted that material movement costs at Koolan Island fell in July to the
bottom of the $8-$10/t range that they have been guiding towards. They were cautious
that it was only one month, but are hopeful that costs are moving into the targeted
regime as material movement increases. This is an improvement from the JunQ
production where management said that costs had not moved into that range yet.
¦ Haulage costs increased to $13.7/t from the DecH of A$10.2/t. Management pointed
out that as shipments increase from Extension Hill relative to Tallering Peak, this is a
natural outcome.
¦ Extension Hill has road haulage costs of $9-$10/t, and rail of $17-$18/t, so all up
around $27/t.
¦ Tallering Peak costs for road are $7-$8/t, and rail are also $7-$8/t. All up $15/t.
¦ Crushing costs also climbed from DecH ($16.15/t) to $18.2/t. We cannot see any
particular reason for this climb, so we expect costs to ease in the forecast period.
Lump Premiums
¦ Management noted that it can obtain a lump premium on high grade of 6-7.5%.
Dividend
¦ MGX has no formal policy on a dividend payout ratio. For the past years it has paid out
about 20%. If MGX is making profits and can afford to pay a dividend it will do so.
¦ The payout ratio for the JunH was18%.
¦ Going forward, MGX will only pay a final dividend.
Exploration
¦ MGX is looking at other opportunities around Tallering Peak.
¦ It is about to start drilling at Fields Find, a DSO target about 60-70km north of
Extension Hill. A discovery there would use the Extension Hill infrastructure.
¦ MGX is having another look at Koolan Island.
¦ Extension Hill South continues to look prospective, but environmental permits for
exploration have not been received.
¦ The exploration budget is expected to be $5-8mnpa.We use moved to $6mn pa, all
expensed.
Cash costs
¦ MGX backed out its own cash costs for the year and reached a C1 cash cost of $55/t
in FY13, down from a very large $94.9/t in FY12.
¦ We expect the urgent reduction in the KI stripping ratio in September 2012 would have
played a major role, together with productivity benefits and greater throughput that
management has subsequently been working on.
¦ We would generally think about shipping rates for MGX being about $16/t, royalties of
$5-$7/t, sustaining capex of $3-$5/t, so all in costs may be around $80/t. While this is
a little higher than peers, its received price should also be higher due to the high grade
of the ore.
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4 | 109637 | 0.315 |
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Price($) | Vol. | No. |
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