The Positives

+ Steady YoY growth of production. In 1Q19, the fine gold production was 8,023oz, 4th high in history, with a 77.6% YoY growth. The respective utilisation rate of vat leach, heap leach, and carbon-in-leach (CIL) was 70% – 75%, 70%, and 100%+. Based on the production record over the past three years, the quarterly gold output from vat and heap leach averaged at 4,000oz. Hence, the revitalisation of production is driven by CIL, which will deliver a full year performance in FY19 (F19e: more than 20,000oz).

The Negatives

– QoQ production declined. 1Q19 fine gold output was 21.3% QoQ lower due mainly to the short-lived halt in production resulting from the replacement of ore milling system and holiday and lower ore grade. Generally, 1Q production is the weakest in a year owing to seasonality. Therefore, we expect CNMC to generate higher output figures for the rest quarters in FY19.

Outlook

The expansion plan below enables CNMC to boost production and lower operating costs further.

Maintain BUY with an unchanged TP of S$0.31

We maintain our BUY recommendation with an unchanged TP of S$0.31.