Scotgold Resources Limited
Scotgold Resources Limited (SGZ) is a Nedlands, Australia-based company and involves in the development and exploration of mineral properties. The group research for silver and gold deposits. Together with the exploration of highly prospective tenements in the Grampian region of Scotland (the Grampian Gold Project), the group is primarily focused on the development of its high grade Cononish Gold and Silver Project in the Scottish highlands, which went into initial production in May 2016 with the commissioning of the Bulk Processing Trial plant using ore from its stockpile. The Grampian project is focused on identifying gold and base metal mineralisation within the highly prospective Grampian Terrane and comprises thirteen Crown Option agreements across Scotland and covers some of the most prospective areas of the Dalradian geological sequence in the UK and is a direct continuation of the Dalradian gold province of Northern Ireland.
The company on 28 August 2019 gave an update to the development of the Cononish Gold and Silver Mine, it stated that process plant equipment manufacture was completed on schedule and currently was being shipped to site, and mine development was on schedule and access to ore was expected by end 2019. Demonstrating returns are significantly improved at a gold price of £1,200/oz with EBITDA increased from £101 million to £147 million, the group undertook a re-estimation of the life of mine financial model for Cononish Project, and design, capital and operational cost re-estimates completed indicated a revised funding requirement of an additional £2.5 million. Through the subscription of 3,285,783 depositary interests of no-par value in the company to raise approximately £1.15 million and the extension to the existing Bridge Barn Loan facility by £1.5 million, this funding requirement has been addressed.
Financial Highlights (H1 2019, in $m)
The company’s reported net loss for the period increased from $0.77 million in H1 FY2018 to $2.12 million in H1 FY19, as pre-development costs expensed as incurred was reported at $1.25 million during the period, against nil in the prior year. Basic loss per share stood at 4.81 cents, an increase from the corresponding period of the last year. In H1 FY19, total current assets decreased to $7.30 million against the previous year same period data. Total assets were $26.20 million, a reduction of $2.19 million as compared with the corresponding period of the last year. Total liabilities reduced to $0.48 million as compared to $2.08 million in H1 FY18. The company’s net assets stood at $25.72 million, a decrease from the previous year same period data. Total equity had also decreased from the corresponding period of the last year. At the end of the current period, cash and cash equivalents decreased to $7.16 million against $11.20 million recorded in H1 FY18.
Share Price Commentary
On 29 October 2019, at the time of writing (before the market closed, at 2:22 pm GMT), SGZ shares were trading at GBX 80, down by 2.43 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 85.95/GBX 27.50. The company's stock beta was -0.41, reflecting a weak inverse relationship with the benchmark index. The outstanding market capitalisation was around £40.01 million.
The company in the first half of the financial year 2019 did not generate any revenue, and its profitability metric is in the negative zone. A mixed movement in the commodity prices may negatively impact the economic viability and profitability of the company’s projects. The gold prices in the international market had improved, but other commodity prices had weakened. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The company has a higher degree of threat due to future exploration, development and production uncertainties. Compared to December 2019 as originally scheduled, the Cononish Project schedule has been revised and first gold production is now expected by end February 2020 as the process plant building and associated civil earthworks are behind schedule, principally due to civil engineering design delay.
BlueRock Diamonds PLC
BlueRock Diamonds PLC (BRD) is a Reading, the United Kingdom-headquartered diamond mining company. The company is involved in the development and exploration of mineral deposits in the Kimberley, South Africa. Kareevlei Mining Proprietary Limited, a subsidiary company, has the Mining Right in respect of the Kareevlei Tenements and connected mining equipment, with a diamond processing facility. The group was established in October 2012 to acquire or invest in under-exploited diamond mines in South Africa and sub-Saharan Africa and operate the Kareevlei Diamond mine, which consists of 5 known kimberlite pipes and produces diamonds of exceptional quality and is the birthplace of diamond mining.
The company on 28 October 2019 announced that it had beaten the previous record sale of a 24.8 carat stone sold in June 2019 for $190,000 ($7,862/carat) and received the highest value achieved for the mine to date for a single stone as it sold the 20.72 carat diamond announced on 27 September 2019 for $236,000 ($11,389/carat) in the October tender. This is the second stone, which was of a similar quality to a number of other larger stones recovered from Kareevlei in excess of 20 carats and underpinned the increasing potential of the Kareevlei mine.
In the third quarter of the financial year, the company reported that increased volumes together with increased grade led to record levels of diamonds being recovered in the quarter, as the group processed over 40,000 tonnes, a month earlier than planned, and saw record production volumes of 92,500 tonnes despite the shutdown of the plant in July 2019. Tender revenue was $1,786,000 (Q3 2018: $614,000), and the average price was $432/c on sales of 4,139 carats (Q3 2018: 1,834 carats sold at $341/c), similar to that achieved in Q2 2019 ($430) suggesting that prices might have stabilised.
Financial Highlights (H1 2019, in £m)
Revenue during the period more than doubled to £1.36 million against £0.55 million, helping the group to report a decline in operating income to £0.47 million versus £0.78 million, even as operating expenses rose from £1.34 million to £1.87 million. As the group reported a foreign exchange gain of £174k against a loss of £503k, loss before tax declined significantly to £381k from £1.29m recorded in the prior year. The total comprehensive loss dropped to £535k against £854k in the previous year, which translated into a basic loss per share of 0.03 pence, against a loss of 0.89 pence in H1 2018. Cash and cash equivalents (including restricted cash) on 30 June 2019 was £1,069,796, and net cash used in operating activities declined to £360k from £574k in the prior year, while net cash and cash equivalents rose by £668k during the period.
Share Price Commentary
On 29 October 2019, at the time of writing (before the market closed, at 2:25 pm GMT), BRD shares were trading at GBX 109.50, down by 1.79 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 215.00/GBX 41.00. The company's stock beta was 2.11, reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £3.62 million.
The company expects it would be profitable in the second half and foresees a significant improvement in the results for the period compared to the first half of the year, as the four months of the year are always affected by the rainy season and the historic Christmas and new year closure. Record levels of carats were produced, and revenue doubled, as the group achieved monthly levels of production at a rate of twice the average for 2018 during May and June 2019 as the company introduced new management team at the end of April 2019. The group will begin to evaluate other mining opportunities in Africa once the Kareevlei operations have demonstrated their long-term profitability and continue to investigate how best to increase the production further, although its primary focus remains ensuring that the existing operations are profitable.
Comparative stock price chart of Scotgold Resources Limited and BlueRock Diamonds PLC
(Source: Thomson Reuters)