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Shares in AIM Listed gold miner Goldplat (LSE:GDP) have been hit hard by a profits warning. It is a minor profits warning and the market has over-reacted sending the shares down by 9.71% to 11.625p. At this price I believe you would be buying for a June 2013 yield of 6.9% rising to 8.6% for the year that starts in less than six months time. The market has over-reacted given how profitable Goldplat is and how much cash it has. This is a buying opportunity. The trading statement was clearly not helpful but looks at the bigger picture.
The trading statement notes that the tailings operations in Ghana and Zim South ( aka South Africa) have performed well with volumes in line with last year but grades better. However in Kenya the company has delayed the expansion of the Kilimapesa Gold Mine due to uncertainties in Kenya’s mining legislation and operational difficulties at the mine. It has thus lost money on this operation.
Putting this in context, the two tailings plants produced 31,534 oz last year. A third tailings plant in Mali is due onstream in the next financial year ( to June 30 2014) and will add another 10-15,000 oz. Kenya is producing a few ounces now and was expected to build slowly to a plateau production of 10,000 oz per annum in the 2014 financial year.
For a fuller detailed analysis of Goldplat and why you should buy the shares click here
The net result of all of this is that H1 operating profits will be the same as last year (£2 million). In terms of Kenya the CEO Russell Lamming says that all issues are “being addressed and we are confident that our continued discussions with the Kenyan government will result in a favourable outcome for all stakeholders, and we look forward to a strong second half of the year.”
So what does this do to my forecasts? Prior to today they were:
| Year to 30th June | 2012A | 2013F | 2014F | 2015F |
| Pre-Tax Profit £m | 5.44 | 7.5 | 12.5 | 14.0 |
| Earnings Per Share (p) | 2.77 | 3.82 | 6.36 | 7.13 |
| Dividends Per Share (p) | 0.6 | 0.8 | 1.0 | 1.2 |
| Net Cash (£million) | 4.57 | 6.5 | 11.0 | 15.0 |
As of today they are
| Year to 30th June | 2012A | 2013F | 2014F | 2015F |
| Pre-Tax Profit £m | 5.44 | 5.75 | 12.5 | 14.0 |
| Earnings Per Share (p) | 2.77 | 2.92 | 6.36 | 7.13 |
| Dividends Per Share (p) | 0.6 | 0.8 | 1.0 | 1.2 |
| Net Cash (£million) | 4.57 | 5.0 | 9.5 | 13.5 |
In other words the adjustment is to this year’s numbers but thereafter this makes little difference. Moreover, assuming that Kenyan issues are resolved then there is no reason why Goldplat should not maintain its progressive dividend policy – look at the cash position.
The shares have clearly slipped on the news and the market cap is now just £19.6 million of which almost a quarter is backed by cash in the balance sheet. On a 2014 (a year we will be in within six months) PE of less than 2 and yield of 8.6% the share price is simply wrong. This is a buying opportunity.
One other gold stock worth having a look at as a recovery play can be found here
Tom Winnifrith writes for 10 leading financial and political websites in the UK and US. You can get alerts on all of Tom’s articles and follow his thoughts by following him on twitter @tomwinnifrith.com and his work is aggregated at his own free to access blog www.TomWinnifrith.com
Tom is the lead writer on the new ADVFN service which sends out one free share tip every working day by email – onefreesharetip.com. In its first seven days every tip has gone up with the biggest winners to date 12.73% ahead after one day and 14.76% ahead after seven days. To join thousands of other investors and make sure that you get your free share tip every working day click HERE
Tom i have been following you for some time and would like to say thanks for your insight on goldplat and also many other resource stocks you have covered in last 12 months which i have done very well on.
I wondered what you thought of Continental Coal ( LON:COOL )as they look like they have made remarkable progress in the last year and now attracting bid offers for their south african assets.For example they recently stated proposed exports of 2.4Mtpa of a thermal coal product, over an initial
30 year mine life generating an indicative Equity Project NPV10 in excess
of US$110m and an IRR of +20%. Surely this is trading at a huge discount ?
Lots of information in the rns they issued last week.