KAU

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17.5¢ kaiser reef limited

Let's just hope they don't try to expand too fast and burn all...

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Stan88

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08/06/22

22:08

Post #: 61904801
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Originally posted by bellcurve: ↑

KAU always seems to miss a key detail in their statements.

in this case, it’s what the upgrade to the mill cost.

don’t get me wrong, I welcome news of refurbishment of the mill, which amongst other matters demonstrates management’s long term view of company prospects. It goes to and augments the upbeat outlook I have for the company.

the upgrade comes ahead of news expected in coming months of a decision to begin mining at Maldon, a second mine for the company and therefore a major derisking event.

the company now is making some serious money given the margin between the AISC and sales is likely wider than $1100/oz.

that being the case, capex on Mill refurbishment is likely chicken feed and therefore isn’t material in nature.

this is back of the envelope stuff, but the company produced 2814 ounces of gold in the March quarter and in all likelihood June quarter production will exceed 3000oz and could approach 4000oz.

Production from the A1 mine was still only ramping up in the March quarter so we can take a conservative number for the current quarter at 3500oz with a profit margin of more than $1100/oz, so profit for the current quarter should approach $4 million.

that would be an annualized $16 million profit on market cap of $28 million.

in short, KAU has suddenly found itself swimming in money. Cash on hand at the end of the March quarter rose to $6.9m from $5.1m at Dec. 31.

there will be some capex on bringing a second mine into production but as executive director Jonathan Downes has pointed out, not all that much needs to be done.

the company could go looking for M&A opportunities, and there are some in the region as posters on HC have highlighted.

KAU could also become a takeover target itself given its handsome cashflow.

or it could always announce an inaugural dividend. Commsec has SOI at 116 million so even a 2 cents dividend would only cost $2.32 million, even now easily accommodated in their current cash position.

a 4c dividend would cost $4.64 million, again which they could payout of cash at bank.

the SP is grossly undervalued and this will surely change in the near future given company fundamentals.

a handsome dividend could see the SP explode.

KAU has a number of challenges but already one includes what to do with all the cash.

i averaged down again yesterday, and will do again this week, and continue to do so as funds allow.

Expand

Let's just hope they don't try to expand too fast and burn all those future profits with unnecessary acquisitions.
They are in a very strong position as a business atm.
Thoughts on gold price expectations for the next 24 months?

KAU Price at posting: 19.0¢ Sentiment: Buy Disclosure: Held
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Let's just hope they don't try to expand too fast and burn all...

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