-Gold production guidance for
-Battle to contain costs in FY20 envisaged
-Enhanced strategy to reduce fresh water consumption at Cowal
FY20 guidance has been reduced to 70-75,000 ozs from 95-105,000 ozs for
Gold bearing veins at the base of the V2 pit, extending into the planned underground development, are now narrower than previously estimated. This is the main driver of the downgrade to production expectations. A resource update from the geological review is due in
Morgan Stanley suspects gold production could be reduced further into FY21 as the narrowing ore bodies affect pit and underground modelling. Macquarie reduces production run rate estimates by -36%, to around 66,000 ounces, while lifting cost estimates to around
FY20 group production has been reduced to the lower end of the guidance range of 725-775,000 ounces. All-in sustainable costs guidance (AISC) for FY20 is unchanged at
The broker finds it difficult to envisage where material cost reductions can occur, given that just delivering in the middle of guidance amid flat production implies a second half AISC of
Citi also notes the share price has fallen -33% since its September high because of the run-up in costs, flat US dollar gold prices and a muted response to the acquisition of
Macquarie lowers its forecasts for FY21 earnings per share by -18% with a -10% reduction in estimates out to FY24 and, as a result, downgrades to Neutral from Outperform.
Cowal
Water is increasingly in the spotlight in drought-ravaged NSW and the company's Cowal mine is a case in point. Cowal is reducing its use of surface freshwater by increasing the number of bores and groundwater usage as well as recycling. Currently, the company uses around 30% of its daily water requirements from the
Brokers are somewhat divided in the outlook for water supply at the mine. Credit Suisse believes the risk is moderating because of the company's strategy to secure water from alternative sources, such as saline bores, that are independent of the NSW-mandated restrictions. A number of bore projects are due for completion in 2020 and there is increased pumping capacity coming from existing bores.
Yet both Morgan Stanley and
Meanwhile,
FNArena's database has two Buy ratings and five Holds. The consensus target is
See also, Risky Move For
FNArena is proud about its track record and past achievements: Ten Years On
All material published by
© 2020 Acquisdata Pty Ltd., source