Excerpts from Lim & Tan Securities report
|CNMC Goldmine (S$0.265, down 1 cent) has seen its share price jump by 23% year-to-date on the back on elevated gold prices where the metal had itself appreciated by 10% in 2019 so far.
Meanwhile, according to consulting firm Metals Focus, global demand for gold in 2019 is expected to rise to the highest in four years as higher consumption by jewelers offsets a fall in purchases by central banks, as written in their Gold Focus 2019 report.
The world will consume 4,370 tonnes of gold this year, the most since 2015 and up slightly from 4,364 tonnes in 2018, consultancy Metals Focus said.
Gold consumption for jewelry will rise 3% this year to 2,351 tonnes, driven by increases of 7% in India and 3% in China - the two largest markets - which will counter lower demand in the Middle East, Metals Focus said.
Purchases by the official sector, which surged almost 75% in 2018 as central banks added gold to diversify their reserves, will slip 9% this year to 600 tonnes, the report predicted.
Physical investment demand will remain largely unchanged from 2018 at 1,082 tonnes. Metals Focus said gold supply would rise by 1% to 4,707 tonnes thanks to higher mine production and recycling and some producer hedging.
Its Gold Focus 2019 report also predicted gold prices would average US$1,310 an ounce this year, up from US$1,268 in 2018 and the highest since 2013.
Source: Phillip Securities
Separately, during its recent 1Q19 results, CNMC had experienced a 70.2% improvement in revenue to hit US$10.4mln while net earnings rocketed 161.4% to US$1.4mln.
The Group had produced and sold 8,023.38 ounces of fine gold in 1Q19 compared to 4,518.50 ounces in 1Q18.
The higher production and sales volumes offset lower selling prices in 1Q19, during which its average realised gold price was US$1,293.28 an ounce, down from US$1,348.96 in 1Q18.
The Group managed to bring down its all-in production costs for 1Q19 to US$923 per ounce of gold from US$1,156 for 1Q18 as the increase in gold output at its flagship Sokor project in Malaysia’s Kelantan state generated economies of scale.
The Group also generated positive operating cash flows of US$176k, resulting in a net cash position of US$15mln which equates to 19% of current market cap.
|“As can be seen from our performance Mr Chris Lim, the Group’s CEO, said: in the last few quarters, we have been able to boost gold production with the carbon-in-leach plant in full swing since May last year.
"We expect the growth momentum to continue as the various initiatives we announced last year to boost production unfold in 2019 and 2020.
"Overall, we believe our full year revenue this year will exceed the record US$39.55mln generated in 2018, barring any unforeseen circumstances.”
According to Bloomberg estimates, analysts are on average forecasting CNMC to see its FY19 net profit expand by 277% yoy to hit US$6.35mln from the FY18 net earnings of US$1.68mln.
At S$0.265, market cap is S$108mln, trailing P/E is 31.1x, P/B is 1.9x and dividend yield is 0.8%. We do not have a rating on the stock.