AMI (ASX) Ann: June Quarter Production

Originally posted by james70: ↑

First and foremost, I would like to thank the many gurus here - @precis, @line of cobar, @PamplonaTrader, @KKR, @flaming. I have learnt a great deal reading your posts throughout the many months. With so many positives and upcoming catalysts, I have decided to take a plunge investing into AMI.

Dissecting the production updates, I came up with the following:

Scenario 1: Using the highest AISC without the by product credits, FX of AUD/USD 0.70 and lowest metal prices in Q2 of $6851 for Cu, $2276 for lead and $2633 for Zinc, AMI will be producing 32,800oz of gold at an AISC at $1024/oz.
Scenario 2: Using the average AISC without the by product credits over the last 5 quarters, FX of AUD/USD 0.70 and lowest metal prices in Q2 of of $6851 for Cu, $2276 for lead and $2633 for Zinc, AMI will be producing 32,800oz of gold at an AISC at $683/oz.
Scenario 3: Using the average AISC without the by product credits over the last 5 quarters and average monthly FX and metal prices, AMI will be producing 32,800oz of gold at an AISC at $494/oz.
Scenario 4: Using the highest AISC without the by product credits, average monthly FX and metal prices, AMI will be producing 32,800oz of gold at an AISC at $835/oz.

In the past month, metal prices have rallied strongly anticipating a recovery in the global economy. Thus going forward, AMI should do really well with the increased by product credits.
Copper price on 13July $9424 vs $8195 Q2 average price (15% higher)
Lead price on 13July $2675 vs $2562 Q2 average price (4.4% higher)
Zinc price on 13July $3190 vs $2982 Q2 average price (7.0% higher)
Also, AMI did not reveal the amount of silver metal produced in the past 3 months. This should amount to a few $million more credits and will likely reduce the AISC further.

And Peak will be mining the high grade Kairos ores with the zinc circuit installed and running optimally. This is evidenced by the increasing amount of lead and gold produced in June vs April and May. Well, we may know very soon sometime this week what grades AMI will be mining as from the past years, AMI tends to release the Ore reserves and Mineral resources statement in the 3rd week of July.

Looking at the metals produced in June, I took a stab at calculating the grades with the following assumptions:
Processed ore at 95% monthly capacity.
Gold recovery at 95%
Copper recovery at 90%
Both lead and zinc recoveries at 85%
And I arrived at these grades:

If these grades keep up, we will be raking in record amount of profits and cash flow. Also Hartley's is forecasting a 4c dividend for FY2021 if the 2c divvy isn't declared for FY2020.

All in all, like what many of the gurus here are saying, AMI at this price is dirt cheap. We should be trading in the $1 range and I believe we should be there sometime this year. GLTAH.

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Hi James70
I liked your post and the way you have constructed your forecasts.
Would hope you continue to post in the future.
However would draw your attention to your by product revenue calculations. The Cu Zn and Pb price averages for the June quarter were lower than the March quarter.
By product credits for the March quarter were $27.5m, therefore your estimates for the June quarter would appear to be too high. While copper production was up and shipment timing may have played a part, what you seem to be missing is the deductions the smelters charge the miners to process the concentrates. These are in addition to the treatment and refining charges that the smelters charge. As an example for zinc concentrates the charge is 15%.
Therefore if the zinc concentrate grade is a standard 51%, the smelter would pay for 43.3% of the contained zinc in the concentrate after deducting the 15%. There are also smelter deductions for lead and copper conc.
In addition treatment charges for zinc and lead concentrates were at record high levels for the June Quarter.

My model would indicate an AISC of around A$1400/oz for the June Quarter.

Going forward my model is estimating earning in excess of $100m pa for the next two years as production of all metals will increase due to higher grades and volume. Also treatment charges for all concentrates have fallen rapidly due to supply disruptions from South America in particular. However, will wait for the quarterly to refine numbers and post.
Can be contacted on [email protected] if you want further information on concentrate terms.