there’s gold in them there hill 51’s

Metals X Ltd (MLX.ASX, $0.20/sh, Mkt Cap $331m) – There’s gold in them there Hill 51’s

Purchase of Alacer Gold’s Australian business unit completed.

December 2013 quarterly report.

DETAILS:
- Acquisition of Alacer Gold’s Australian operations for $40 million.
- Gold Division produced 51,287oz at a cost of $812/oz and EBITDA $32.65m.
- Tin Division produced 204,000t tin metal at a cost of $20,573/t and EBITDA $5.36m (50% share).



ANALYSIS:

Acquisition of Alacer assets look like a winner. The assets acquired were the Higginsville Gold Operations (total mineral resource 15.9Mt @3 g/t Au containing 1.55Moz) and the South Kalgoorlie Operations (total mineral resource 87.8Mt @2 g/t Au containing 5.69Moz. During the quarter 298k tonnes of ore was mined @5.15 g/t and 385k Tonnes processed @4.34 g/t. Recovery was 95% and gold metal produced 51287oz at a cost of $812/oz. EBITDA for the Gold Division was $32.65m.

Outstanding result in only two months of operation. This is clearly an excellent result for the quarter given MLX had operational control of the assets for only 2 months of the quarter. Given the history of management of MLX with Hill 50 Gold and Abelle it is reasonable to assume that these assets will be further enhanced by the definition of further reserves and resources over time to provide significant cash flow and profits to MLX for funding of portfolio projects.

Operational impacts continue to hold back Renison’s potential. Mining was impacted by a crown pillar failure. Tonnes mined were 8% lower at 146k tonnes at 1.45% Sn while tonnes processed increased by 1.6%to 156k tonnes at 1.44% Sn. Tin produced was 1,534t at a total cost $20,573/t. The sale price achieved was $24,673/t for an EBITDA of $5.36m for MLX’s 50% share. Exploration activities during the quarter defined extensions and upgraded the known resources. Total mineral resources at Renison stand at 11.57Mt @1.76% Sn for around 204kt of tin metal. The Rentails Project contains 20.6Mt @0.45% Sn for 93kt of tin metal. MLX remains the best stock for leverage to any uplift in Tin prices.

Rerating to continue on strong operational cash flow. MLX operational assets are performing well with a combined EBITDA for the quarter at $38m. We view this strong result as supportive that MLX can grow through upside in the Gold Division and no major capex requirement to maintain current production levels. MLX has significant tax losses to utilise against future earnings and the sleeping giant in the portfolio remains a with Wingellina if it can be monetised as envisaged.

Recommendation:

We rate MLX a TRADING BUY on the basis that management has significant experience in turning around high grade brownfield gold assets into profitable cash generating assets.

http://www.fostock.com.au/announcements/metals-x-ltd-mlx-asx-0-20