Company aims to be first in UK to exploit fractured basement reservoirs
As mining investors’ interest shifts to cashflow (see Shares, Commodities, 26 Sep) we believe Rambler Metals & Mining (RMM:AIM) at 24.8p deserves re-appraisal. The Canadian gold and copper producer has a small but profitable operation. Its strategy is to acquire nearby assets that can feed its Nugget Pond processing facility. The £35 million cap reckons it will be debt free by the year end.
Financial results on 29 October are forecast to show a maiden full-year pre-tax profit to the tune of $3.4 million. This is according to house broker Cantor which heavily downgraded its 2013 earnings forecasts last month after gold production was much less than expected. But after earlier teething problems, the fourth quarter period has raised confidence in the operations. Indeed, Cantor reckons earnings will soon improve.
The broker is looking for $17.4 million pre-tax profit and $24.9 million operating cashflow in the financial year to July 2014. Deducting Cantor’s $5 million capital expenditure estimate gives a $19.9 million free cashflow. While that theoretically provides a pot for dividends, there’s numerous studies and possible equipment purchases where cash would arguably be better spent in 2014, in order to give Rambler a stronger platform for future earnings growth.
Rambler wants to install a new crushing and grinding circuit at Nugget Pond that would enable it to run its copper and gold mills separately and therefore increase output. This may cost up to $10 million, according to stockbroker SP Angel.
The company is also buying 50% of the Little Deer and Whalesback former producing high-grade copper mines for $550,000, of which $220,000 is in cash. Chief executive officer George Ogilvie says Rambler will conduct a drill programme in 2014 to give greater confidence in Little Deer’s resource estimate. It will then redo an economic study as the original $110 million capital expenditure estimate from 2011 included $60 million for processing and tailing facilities that aren’t needed by Rambler as this can be served by its Nugget Pond site.
An updated reserve and resource statement is due by early 2014 on Rambler’s flagship Ming mine. It wants to show depleted ore is being replaced by new exploration ounces and silence critics that Ming only has a short mine life. It already has a deeper zone that, while not yet in Rambler’s development plans, could supply more than 20 years’ copper and gold. The first five years’ production would incur $231 million capital spend, yet Ogilvie believes there’s a chance to cut this bill by installing a heavy media separation plant underground. It could then run material through Nugget Pond and not have to build a new mill, potentially resulting in a significant net capex saving.
