People seem have missed some really big news in this report and that is AISC at Sugar Zone is down to $C2,000. That's around $1,000 AUD less than when the plant was closed and would value Sugar Zone using known reserves of 375,000 and would lift the value of it by another $375 million.
Sugar South isn't in reserves so I'd say it would lift reserves to 500,000 ounces without too much of a stretch given the number of hits outside of the measured resource. This means Sugar Zone has the potential of generating almost a billion in cash. The change in AISC is material in my view as the entire company has an Enterprise value of just over $2 billion. Wiping off $1,000 in costs per ounce will make a big difference to the viability of Sugar Zone. Needless to say management couldn't emphasise that could they.
It would have been good for the company to state exactly when they expect to restart Sugar Zone. I'm guessing another 15 months in time for FY27.
I found it odd the company never mentioned Mt Monger or Deflector in their half year report. No big deal but if they could provide detail around the other two mines, why not Mt Monger.
The plant expansion at KOTH and the addition of Sugar Zone will see ounces push up to 500,000 per annum by FY27 onwards which at current prices means the company would be generating over a billion a year for at least 8 years after that. Yet current market cap less cash is just over $2 billion. Go figure.
I would think the company should generate over $100 million this quarter given they are producing 100,000 ounces with 62,000 ounces unhedged.
Capex, exploration and admin for the full year was circa $200 million or $500 an ounce. There has been $110 million sunk already for the first half year so I would expect costs to be around $450 on top of average AISC of $2,350 totalling $2,800 for the back half. The hedged ounces will break even while the unhedged ounces would be looking at a $1,700 margin at current prices or just over $100 million in free cash flow.
Just my opinion. Do your own research.
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