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Goldplat plc Q&A with VSA Capital Mining Analyst Oliver O’Donnell (LON:GDP)

VSA Capital Mining Analyst Oliver O’Donnell caught up with DirectorsTalk for an exclusive interview to discuss Goldplat plc (LON:GDP)

 

Q1: Goldplat had a difficult 2016, do you think it’s put its issues behind it now?

A1: Yes, I think these results really show that they’ve really turned it around. Obviously, at the start of calendar 2016 there were issues that impacted the financial results last year and now you can see production up 22% year on year to 21,300 ounces with production up both in South Africa and Ghana. Revenues are up very strongly and EBITDA up to £1.4 million, up 161% year on year and so they are well on track for our full year estimate of £3 million which is a 60% increase year on year. Net income as well, they reversed the losses that they experienced in the first half of 2016, earning 742,000 in this period, it was slightly down because of some FX losses but I think that’s to be expected given the moves that have happened in the currency last year. I think what’s important to note is that as well as turning the company around, Goldplat took the chance to really improve the efficiency in the way that they’re running the business and I think that’s showing through in these earnings as well.

 

Q2: You touched on FX, how have the currency moves impacted Goldplat’s interim results?

A2: Well, obviously, it’s a company operating in Ghana and South Africa but they’re reporting in sterling and there have been some big moves in currency over the past 6 months with Brexit in June. So, you’ve seen sterling depreciate heavily against the dollar which has meant as well as gold prices rising in dollar terms, this has been enhanced and sterling gold prices have risen even more significantly. However, the rand has appreciated versus the pound as a result of Brexit as well and so that’s had a negative impact on Goldplat’s costs but overall that impact of higher gold prices seems to have won over and so revenue up 35% year on year to £14.4 million, a bigger part of that is the higher sterling gold price. That is even with the fact that Goldplat withheld 5,000 ounces or so from Ghana which explains the discrepancy between production and sales in this period, they have announced that that gold has now been sold and was shipped in January so that impact should work itself through in the second half so, we do expect ounces produced and sold to be fairly similar by the end of the year.

 

Q3: The Kilimapesa development appears to be on track, how important will this be for Goldplat plc?

A3: So, we’ve talked about this recently and, obviously, the impact hasn’t started to show through on the interim earnings as the plant was only commissioned earlier this calendar year. It is now running at 60 tonnes per day with stages 2 and 3 due to be completed in the next few months which will bring it to 200 tonnes a day and an annual production of around 6,000 ounces from next year onwards will really change the asset in terms of value for Goldplat. The mine lost £600,000 at the operating profit level last year and so at a breakeven level and then returning to profit that’s really going to unlock a significant amount of value for the group and as an asset standing alone. So, this is really one to watch as the key catalyst to allow Goldplat to rerate from where it’s currently trading.

 

Q4: You upgraded your outlook for the full year production, how significant will this be?

A4: Obviously, the rand impact on costs has been negative and so this is quite important that they’ve had a strong first half in South Africa so now we are expecting 28,000 ounces of production in the full year, they’ve produced just over 12,000 in the first half. I think one of the key things, one of the proactive ideas that have been enacted in this period, has been having dedicated personnel who are going out looking for material and new contracts for Goldplat’s to process and they’ve now got such a strong stockpile of inventory ready to process that now annual production at the South African operations is likely to be high year on year. I think that project is exactly the kind of proactive approach which I think shows the company has recovered operationally and it’s now able to ride out issues like a sudden move in FX and make this level or earnings far more sustainable. At the moment, £3 million suggests it’s trading on less than 3 times EV/EBITDA which is about half of where its historical average has been so I think this is a really key time for Goldplat and with that key catalyst of Kilimapesa coming through, it looks like a very interesting time for the company.

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