You said "At around 5g/t for this u/g mine, it appears too low for any meaningful profit margin".
If you focus on cash generated from operations relative to revenue you can get a good underlying feel for the fundamental profitability of a mine.
Over the last 6 years MML has generated $373m from operations on revenue of $546m. Which works out at an overall operational margin of 68%. Last year (the worst) ops generated $49.7m from revenue of $84.2m (59%).
Contrast these figures with a few other ASX-listed goldies:
SLR over 4 years: OPs = $174.6m, revenue = $750.7m, margin = 23%
SBM over 4 years: OPs = $418.9m, revenue = $1789.6m, margin = 23%
RRL over 3.5 years: OPs = $488.8m, revenue = $892.4m, margin = 55%
PRU over 3 years: OPs = $137.3m, revenue = $702.5m, margin = 20%
OGC over 5.5 years, OPs = $701.7m, revenue = $2175.2m, margin = 32%
NST over 4 years, OPs = $293.2m, revenue = $655.7m, margin = 45%
NCM over 3 years, OPs = $3910m, revenue = $12231m, margin = 32%
EVN over 4 years, OPs = $629.9m, revenue = $1830.8m, margin = 34%
EVR over 4.5 years: OPs = $160.4m, revenue = $1295.6m, margin = 12%
BDR over 1.5 years: OPs = $99.1m, revenue = $363.6m, margin = 27%
So even in it's worst year MML's operational margin was better than all the above.
If it did not have this strong underlying profit margin it would not have been able to self-fund the 3 year expansion programme. Now that they have made that large investment it seems eminently probable that over the next few years they will benefit from the pay-back.
CPDLC
MML Price at posting:
68.5¢ Sentiment: Buy Disclosure: Held
(20min delay)