The quarter financials continued to show Q-on-Q improvement in line with good grade and recovery levels. Mined & milled ore levels were down a bit as previously guided because of the SAG mill re-line.
Reported AISC of US$950/oz agreed exactly with all cost figures shown in the report including some discretionary exploration expense.
FY16 guidance looks perfectly achievable according to my estimate of 123 koz of production and an average AISC of c. US$942/oz - assuming tonnage and grade levels remain at current levels for 2H16.
No figure given for broken ore inventory held within mined stopes. It was reported as 60,000t in June 15 (excl development ore) so, based on the half year difference between mined ore and milled ore, it may currently be as high as c. 81,000t (excl dev ore). This would equate to around 19 koz of contained gold which is awaiting hoisting.
Figures suggest that currently c. 20% of hoisting capacity is being utilised for non-ore waste removal. The increased depth of the service shaft from L8 to L10 (+ sump) would appear to add another 504 cub metres of waste that will need to be hoisted by the L8 shaft (or used as stope infill). At a SG of 2.62 I estimate that this would be an additional 1,320t of waste.
Difficult to know when the other mine improvements will complete (ventilation shafts, et al). But when they do, the volume of waste should decrease in the near term freeing up mine haulage capacity for ore.
The increased depth of the service shaft will extend it's previously estimated life (10 years) by a couple of years or more. Although I have eagerly awaited the completion of this project and the boost of L8 shaft capacity by 300tpd (21%), I can also see the value of doing this now whilst the gold price is suppressed as it is likely that the delayed draw-down of broken ore held in mined stopes are likely to benefit from higher prices the longer they are held underground - but that is just my personal opinion!
The blind sinking of the service shaft from above to L3 will remove an unwanted need to hoist this waste from underground if it had continued by using the Alimak method. But, as mentioned above, there will now be an increased waste tonnage generated from the 126m of additional sinking below Level 8.
I am assuming that the stripping of the entire service shaft to it's final 3.2m x 3.65m dimensions will wait for the completion of the new head-frame and winder, as then the c. 9,000t of additional waste can be directly hauled up the service shaft without needing to use up any of the L8 shaft capacity.
All in all, I viewed this quarterly as very positive. I still see MML priced at an extreme under-valuation on a simple Price/Earnings basis. The 1H16 Financial report in a months time should help to emphasis this market multiple anomaly. As to whether it will make any impact on the ASX price is a moot point given the extraordinarily poor sentiment that continues to weigh down the SP!
CPDLC
MML Price at posting:
38.0¢ Sentiment: Buy Disclosure: Held
(20min delay)