Gold: Producer MOY.asx Buy Share Price Valuation $0.26 Price Target (12 month) $0.30 Brief Business Description: Hartleys Brief Investment Conclusion Chairman & CEO Top Shareholders IMC Resource Investment Pty Ltd 45.8% Board & Management 1.9% Company Address Issued Capital 786.2m - fully diluted Market Cap - fully diluted A$20.1m A$0.0m EV EV/Resource Au oz 88.7 EV/Reserve Au oz 610.8 Prelim. (A$m) CY16a CY17e CY18e Prod (koz Au) 84.4 73.3 96.8 Op Cash Flw 42.0 37.9 49.6 Norm NPAT 11.9 14.3 34.2 CF/Share (cps) 5.5 4.9 6.3 EPS (cps) 2.2 1.4 3.4 P/E 7.6 12.1 5.0 Au Resources (Moz) 1.28 Reserves (Moz) 0.19 Mike Millikan Resources Analyst Ph: +61 8 9268 2805 E: [email protected]27 Dec 2017 $0.170 Gold producer in the Pilbara Peter Cash (CEO) Ground Floor, 10 Kings Park Road West Perth, WA 6873 WA gold producer w ith both production and mine life grow th potential. Fresh ore processing study w ell progressed. Significant exploration upside. Bartons first underground in early CY18. Greg Bittar (Non-Exec Chairman) Hartleys has provided corporate advice w ithin the past 12 months and continues to provide corporate advice to MOY for w hich it has earned fees. The analyst recently visited site at the expense of MOY, all associated costs covered by MOY. 842.6m A$133.7m A$143.2m A$113.6m Cash and Bullion (30 Sep 17a) Debt (30 Sep 17a) MILLENNIUM MINERALS LTD (MOY) Nullagine organic growth options coming to the fore Exploration remains a key value driver for Millennium (MOY) at the 100%- owned Nullagine gold project in WA. The Company committed ~A$22M to exploration in CY17, and a similar budget for CY18 appears likely. The Company continues to report outstanding results. In particular from deeper drilling at Barton, which is expected to be the Company’s first underground mine and recently from a new greenfields discovery at the Redbeard prospect, which reports good-grade, shallow gold mineralisation. Drilling continues to be focused on oxide resource/reserve growth and deeper testing of the underground potential for the field. The aim is to establish more sustainable, lower cost ore sources, to provide higher production levels to maximise free cash generation. MOY is targeting annual production in excess of 100kozpa for a minimum of 5 years, with the higher grade ores from deposits such as Bartons considered key for this objective. Recent success at Redbeard highlights more upside to come First pass RC drilling at Redbeard, part of the Yates Trend has now defined gold mineralisation (grading +1g/t Au) over some 480m of strike and remains open to the west and down-dip. Recent drill highlights include: 9m @ 3.9g/t Au from 17m (incl. 1m @ 8.1g/t Au), 10m @ 2.6g/t Au from 37m and 12m @ 2.0g/t Au from 30m (1m @ 5.6g/t Au). Resource infill drilling has commenced with the aim of delivering a maiden resource in early CY18. Redbeard is located ~40kms northeast of the processing plant, and is expected to provide oxide and transitional ores to the mine plan over time. Importantly this new potential mining centre (Twenty Mile Sandy) is considered under explored and has proven prospectivity (including undrilled historical workings). Golden Gate new oxides and conceptual UG design completed Field mapping and sampling at the Golden Gate Mining Centre has identified a new high grade zone of mineralisation, with rock chips from quartz veins grading up to 49g/t Au. Drilling to test this area is expected to commence in the New Year and could provide additional oxide material for the Nullagine plant. High-grade sulphide ores extend under a number of previously mined open pits and are considered potential underground mines. The conceptual underground mine design has already been completed for Golden Gate, but a plant modification to enable processing of sulphide ores is required (ball mill, flotation circuit and concentrate handling facilities), capex of ~A$40-46M. Bartons UG FS due early in the New Year; Maintain Buy The Bartons underground feasibility study (FS) is due for release early in the New Year. The Phase 1 underground current resource estimate is ~80koz grading 5.3g/t Au, but with the system is still open at depth and with drilling ongoing we expect resources to grow and confidence to increase. We envisage a smooth transition to underground mining, once a decision to proceed has been approved by the MOY Board and low pre-production capital costs are expected as the underground starts from shallow depths. CY17 guidance remains unchanged for 75k–80koz @ AISC of A$1,360– $1390/oz. We maintain our Buy recommendation on MOY, with our latest price target of 30cps. The Company appears well poised for production growth and for mine life extensions. Reserves and resources are expected to be updated in Q1 CY18. Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000 Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Further information concerning Hartleys’ regulatory disclosures can be found on Hartleys website www.hartleys.com.au 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 . 1. 2. 3. 4. 5. 6. Dec-17 Sep-17 May-17 Jan-17 Volume - RHS MOY Shareprice - LHS Sector (S&P/ASX SMALL RESOURCES) - LHS A$ M Millennium Min Ltd Source: IRESS
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MILLENNIUM MINERALS LTD (MOY) - Australian … MINERALS LTD (MOY) Nullagine organic growth options coming to the fore Exploration remains a key value driver for Millennium (MOY) at
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Total Non-Curr. Liabil. A$m 11.4 19.2 19.2 19.2 All In Sustaining Cost (AISC) $A/oz 1,175 1,213 1,411 1,311
Total Liabilities A$m 26.3 30.3 27.6 29.4Net Assets A$m 55.6 75.7 86.7 113.0 Price Assumptions Unit Dec 15 Dec 16 Dec 17 Dec 18Net Debt A$m -7.7 -25.2 -26.5 -49.1 AUDUSD A$/US$ 0.74 0.75 0.78 0.78
Gold US$/oz 1133 1227 1278 1303
Cashflow Unit 31 Dec 15 31 Dec 16 31 Dec 17 31 Dec 18 Gold A$/oz 1529 1632 1645 1674Operating Cashflow A$m 30.6 41.9 37.9 49.6Income Tax Paid A$m 0.0 0.0 0.0 0.0 Hedging Dec 15 Dec 16 Dec 17 Dec 18Interest & Other A$m -0.9 0.1 0.0 0.0 Hedges maturing? No No Yes Yes
Price Target Methodology Weighting Spot 12 mth out
70% $0.26 $0.29
NPV base case at spot commodity and fx prices 30% $0.26 $0.30
Risk weighted composite $0.26
12 Months Price Target $0.30
Shareprice - Last $0.170
12 mth total return (% to 12mth target + dividend) 74%
NPV base case
Only minor
adjustments to our
earnings forecasts
We now model
increased production
in CY18, wi th the
introduct ion of
Bartons underground
expected to l i f t mil l
grades, we now
forecast ~97koz at
AISC of ~A$1,311/oz
Hart leys sum of par ts
valuation for MOY is
26cps
Current spot NAV is
26cps
Hart leys 12 month
price target is 30cps
Hartleys Limited Millennium Minerals Ltd (MOY) 27 December 2017
Page 7 of 9
RISKS Solid cashflows continue to be generated from the Nullagine gold operation. With
cash of ~A$20Mand no debt, financial risks appear low. Gold prices are volatile but
fundamentals remain favourable.
Fig. 6: Key assumptions and risks for valuation Assumption Risk of not realising
assumption Risk to valuation if
assumption is incorrect
Comment
Increased production over a longer mine life
Moderate Meaningful We assume further exploration success at Nullagine to further convert the current +1Moz
resources to reserves. We now model increased production in CY18, with the
introduction of Bartons underground expected to lift mill grades, we now forecast ~97koz at
AISC of ~A$1,311/oz (this forecast is subject to change)
Metallurgy Moderate Meaningful Metallurgy is a key risk within the Nullagine
fresh rock and further study work will guide us on the significant potential that exists within the
fresh ore material at Nullagine
Exploration Upside Moderate Small We assume exploration upside for MOY. We have assumed a relatively small value ($80M)
compared to the significant exploration potential of the region
Gold Price High High Our gold price forecasts are in line with sell
side consensus
Conclusion Our assumptions have associated meaningful risks. Processing of fresh ore has metallurgical risks which will be mitigated through development study work.
Source: Hartleys Research
Hartleys Limited Millennium Minerals Ltd (MOY) 27 December 2017
Page 8 of 9
EV/EBITDA BANDS
Fig. 7: Using Hartleys base case commodity forecasts
Source: Hartleys Research Estimates, IRESS
Fig. 8: Using spot commodity prices
Source: Hartleys Research Estimates, IRESS
.00
.10
.20
.30
.40
.50
.60
.70
.80
.90
1.00
MOY Actual
Hartleys Target
8x EV/EBITDA
6x EV/EBITDA
4x EV/EBITDA
2x EV/EBITDA
1x EV/EBITDA
Shareprice
.00
.10
.20
.30
.40
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.60
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MOY Actual
8x EV/EBITDA
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4x EV/EBITDA
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1x EV/EBITDA
Shareprice
Page 9 of 9
HARTLEYS CORPORATE DIRECTORY Research Trent Barnett Head of Research +61 8 9268 3052
Mike Millikan Resources Analyst +61 8 9268 2805
John Macdonald Resources Analyst +61 8 9268 3020
Paul Howard Resources Analyst +61 8 9268 3045
Aiden Bradley Research Analyst +61 8 9268 2876
Michael Scantlebury Junior Analyst +61 8 9268 2837
Accumulate Share price appreciation anticipated but the risk/reward is
not as attractive as a “Buy”. Alternatively, for the share
price to rise it may be contingent on the outcome of an
uncertain or distant event. Analyst will often indicate a
price level at which it may become a “Buy”.
Neutral Take no action. Upside & downside risk/reward is evenly
balanced.
Reduce /
Take profits
It is anticipated to be unlikely that there will be gains over
the investment time horizon but there is a possibility of
some price weakness over that period.
Sell Significant price depreciation anticipated.
No Rating No recommendation.
Speculative
Buy
Share price could be volatile. While it is anticipated that,
on a risk/reward basis, an investment is attractive, there
is at least one identifiable risk that has a meaningful
possibility of occurring, which, if it did occur, could lead to
significant share price reduction. Consequently, the
investment is considered high risk.
Institutional Sales Carrick Ryan +61 8 9268 2864
Justin Stewart +61 8 9268 3062
Simon van den Berg +61 8 9268 2867
Chris Chong +61 8 9268 2817
Digby Gilmour +61 8 9268 2814
Veronika Tkacova +61 8 9268 3053
Wealth Management Nicola Bond +61 8 9268 2840
Bradley Booth +61 8 9268 2873
Adrian Brant +61 8 9268 3065
Nathan Bray +61 8 9268 2874
Sven Burrell +61 8 9268 2847
Simon Casey +61 8 9268 2875
Tony Chien +61 8 9268 2850
Tim Cottee +61 8 9268 3064
David Cross +61 8 9268 2860
Nicholas Draper +61 8 9268 2883
John Featherby +61 8 9268 2811
Ben Fleay +61 8 9268 2844
James Gatti +61 8 9268 3025
John Goodlad +61 8 9268 2890
Andrew Gribble +61 8 9268 2842
David Hainsworth +61 8 9268 3040
Murray Jacob +61 8 9268 2892
Gavin Lehmann +61 8 9268 2895
Shane Lehmann +61 8 9268 2897
Steven Loxley +61 8 9268 2857
Andrew Macnaughtan +61 8 9268 2898
Scott Metcalf +61 8 9268 2807
David Michael +61 8 9268 2835
Jamie Moullin +61 8 9268 2856
Chris Munro +61 8 9268 2858
Michael Munro +61 8 9268 2820
Ian Parker +61 8 9268 2810
Matthew Parker +61 8 9268 2826
Charlie Ransom
(CEO)
+61 8 9268 2868
Mark Sandford +61 8 9268 3066
David Smyth +61 8 9268 2839
Greg Soudure +61 8 9268 2834
Sonya Soudure +61 8 9268 2865
Dirk Vanderstruyf +61 8 9268 2855
Samuel Williams +61 8 9268 3041
Jayme Walsh +61 8 9268 2828
Disclaimer/Disclosure
The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold
shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities.
Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice
mentioned in publications to clients.
Hartleys has provided corporate advice within the past 12 months and continues to provide corporate advice to Millennium Minerals Limited for
which it has earned fees. The analyst recently visited site at the expense of MOY, all associated costs covered by MOY.
This report was prepared solely by Hartleys Limited. ASX did not prepare any part of the report and has not contributed in any way to its content.
The role of ASX in relation to the preparation of the research reports is limited to funding their preparation, by Hartleys Limited, in accordance with
the ASX Equity Research Scheme. ASX does not provide financial product advice. The views expressed in this research report may not
necessarily reflect the views of ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is
made and no responsibility or liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of the research reports.
Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting
your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs.
Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued.
Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in
negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law.