Peak had a couple of lean years over 2022 and 2023. If you look back at the reasons why there are a bunch including.. high levels of talc in the ores impacting recoveries, difficult ground conditions, low availability of skilled labour, a blasting misfire, demobilising an underperforming contractor and transitioning to owner operator and the list goes on....
A lot of these issues are part and parcel of underground mining operations however most operations build themselves 'optionality' in the mine by development being way ahead of mining.. this was never the case with Peak where the bare minimum development was done (<300m) so these issues such as a blasting misfire or difficult ground conditions really impact productivity as they have no contingency whilst these issues are dealt with. In mid 2023 they brought up a second jumbo (from Dargues) and have lifted development to the point where its been 5 consecutive quarters over 700m.. they also added a third production drill rig in late 2023... and continue to invest in new equipment. As the company continues to highlight below "development is key to unlocking value at Peak".
They've already mined 455kt in first three quarters of CY24..and in the past two quarters alone (June & Sept quarters) generated A$40m of FCF from Peak. If you do the math on guidance for FY25 which they have maintained... Peak should be doing 11koz gold per quarter remaining at >A$2,000/oz margins on my math. So close to A$25m of FCF per quarter.
So the company trades at a A$300m MCAP, with A$100m of cash... ergo A$200m EV. Has Peak generating close to A$100m pa and the game changer Federation should be doing north of A$130m pa once ramped up. That is to say it is trading <1xEV/Forward EBITDA. The value seems absurd and now that the historical issues at Peak, Dargues and Hera seem to have come to an end it seems a far easier story to digest for the market.
The turnaround of operations has been going on for ~5 quarters now but the turnaround in the share price I think has only just begun.
AMI Price at posting:
18.0¢ Sentiment: Buy Disclosure: Held
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