Equinox Minerals
Very encouraging signs
EQN has delivered a step change in production, with output for April and May showing a 43% increase on 1Q10 average monthly volume. We remain optimistic that full-year guidance of 135kt can be exceeded, particularly with five additional trucks due online by September. We reiterate our high-conviction Buy call.
Step change in monthly production a major positive EQN has announced production for April/May of 29.7kt, which implies 44.6kt for the quarter if the run rate can be sustained. This would be a significant increase on 1Q10 output at 30.5kt, and adding the two together indicates 75kt for the half year is achievable. The key questions are whether the lift in head grade can be maintained, and how much of an impact the new mining methods have had in reducing dilution. We assume limited benefits were achieved from lower dilution and that the driver of the uplift was a high-grade zone. The average Cu grade lifted from 0.93% in 1Q10 to 1.07% in April/May. We remain conservative in our forecasts, expecting grades to track back to previous-quarter averages.
Additional trucks still on the way
EQN is yet to receive all five additional trucks as agreed with Hitachi. Their delivery should support higher material movements in 2H10. There are currently two trucks on site that need to be built, and these should come online within the next two months. A further three trucks are expected by EQN to be online by September. If higher grades can be maintained for the next few months, and higher material movements in the back end of the year lift processing rates, 150kt+ for 2010 is plausible, in our view. Nevertheless, the company has maintained guidance at 135kt, which continues to look conservative compared to our 143kt estimate.
Investment view ? high conviction Buy call
The production update was a very positive announcement from EQN, in our view, and should provide the market with greater confidence in the outlook for the company. We reiterate our high-conviction Buy call on the stock. EQN offers strong production growth, expansion opportunities, strong cash flow, no exposure to the RSPT, an FY11F PE of just 6x and a 15%-plus discount to NPV, not factoring in the expansion, which could add 40-50c to our NPV.
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EQN
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Last
7.6¢ |
Change
0.001(1.33%) |
Mkt cap ! $11.81M |
Open | High | Low | Value | Volume |
7.6¢ | 7.6¢ | 7.6¢ | $684 | 9K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
2 | 81000 | 7.6¢ |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
8.0¢ | 60000 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
2 | 81000 | 0.076 |
2 | 202552 | 0.075 |
1 | 150000 | 0.074 |
2 | 64285 | 0.070 |
1 | 14925 | 0.067 |
Price($) | Vol. | No. |
---|---|---|
0.080 | 60000 | 1 |
0.081 | 100000 | 1 |
0.085 | 161965 | 2 |
0.087 | 17361 | 1 |
0.089 | 95000 | 2 |
Last trade - 15.47pm 08/08/2025 (20 minute delay) ? |
EQN (ASX) Chart |