PSV's 1H06 headline net loss of $31.9m compared to a loss of...

PSV's 1H06 headline net loss of $31.9m compared to a loss of $9.0m in 2H05. The 1H06 result was impacted by a $25.2m unrealised loss on the marked to market value of gold hedges.

Stripping out the unrealised losses, the adjusted net loss came in at $6.7m compared to $9.0m in the previous period. The loss reflected slower than anticipated move towards capacity production at Fosterville and a steep rise in amortisation costs.


Sales revenue of $30.0m dwarfed 2H05 sales of $2.2m as Fosterville moved towards capacity. Production of 47,900oz compared to 3,586oz of gold in 2H05. Above budget cash costs of A$463/oz reflect the slower than anticipated startup. A total of 45,405oz were sold at an average price of $628/oz.


Net operating cashflow of $8.3m compared to net outflows in the previous and pcp.


PSV says Fosterville plant performance continues to improve.


Business Impact: The adjusted net loss of $6.7m was worse than our forecast $4.6m loss, primarily due to significantly higher than expected amortisation. Net operating cashflow improved creditably to $8.3m despite working capital increasing $2.9m. It is particularly important to focus on PSV's cashflow, given the high levels of amortisation and distortion of the profit and loss statement due to unrealised hedge gains and losses. Following the result, we lower our forecast FY06 adjusted net loss from $2.9m to $5.2m. Our FY07 adjusted NPAT improves 10% to $6.4m following a slight increase in our forecast FY07 average spot gold price from US$425/oz to US$438/oz. EPS is unchanged after diluting for the $30m in convertible notes. Our valuation is unchanged at $0.35 a share. Assumptions include a 10% discount rate, US$500/oz gold, a 1.4xNPV gold specific premium and an A$1.00 = US$0.76 exchange rate.

Forecast Impact: --

Recommendation Impact: Downgrade recommendation from Speculative Accumulate to Hold due to share price movement. With higher amortisation charges, PSV's share price may pull back as investors focus on the impact of reduced profits on PE's despite cashflow being unaffected. (Last updated: 01/03/2006)