ord minnett downgrade the reason, page-8

Hi CW,

You do great work and I really appreciate the value you add to this forum.

I agree with you and don’t rate this OM downgrade, it is too reactive for me. I can understand why OM downgraded fml based on last quarter results, but investing is about looking to the future, seeing potential and capitalising on it.

I wasn’t disappointed with production results last quarter, they were in line with information given at the AGM last November. We knew about the rain and the mill shut down.

The following was forecast gold production guidance given by cre and fml in the last quarter compared to actual production results.

Gold production (oz)
CRE
Forecast 17,000-19,000
Actual 15,666 this figure was given to us in the CEO’s AGM presentation last November

FML
Forecast 20,000-25,000 this guidance was given to us last November
Actual 21,432

FML consolidated
Forecast 37,000-44,000
Actual 37,098

Equity production
Forecast 33,872-40,504
Actual 34,216

As you can see, cre/fml were both within forecasts given at the AGM last November. Nothing to surprise us in the last quarterly report here.

OM said that equity production was 18% less than their expectation. That means they were expecting 41,726, which is 1,222oz above the top guidance range given at the agm in November. I don’t think it is fair to say that they had ‘Significantly lower than expected gold production’, it should read ‘OM had significantly higher expectations than what was forecast’. OM call the equity production ‘disappointing, even though it was within forecasts given over two months ago. If I was advising investors (which I’m not), I would have downgraded the share price in November, with an upgrade coming out now.

Looking to the future, will OM re-rate the fml group if they produce 50,000oz as forecast next quarter, with lower costs? We know the direction the share price will have headed by then, and proactive, not reactive investors will be the winners. And people wonder why share prices sometimes jump after quarterly reports come out, only to settle down again……. Is it the sizzle of reactive investors getting burnt?

This is not financial advice in any sense, just my thoughts.