Goldplat: Cash Generative Core Business

Over the past five years Goldplat (GDP) has operated an increasingly cash generative gold recovery business in South Africa and Ghana that has allowed it to become a market leader in this type of operation. The cash flows generated from these gold recovery businesses have been used to invest in and develop greenfield gold mining in Kenya, Ghana and Burkina Faso, with the Kilimapesa mine in Kenya achieving its first gold pour in January 2012. Following extensive research in West Africa, it was reasoned that a third centralised recovery should be built. Consequently Goldplat has registered a new trading company, Midas Gold SARL and feasibility studies are underway to establish an initial plant in Burkina Faso. Goldplat has the ability to finance these operations through its internal cash flow and is not highly leveraged to the gold price.


Cash-generative core business
Goldplat reported a strong operational performance in H113, with gold production up 16% y-o-y to 17,918oz and gold revenues rising 38% y-o-y to £15.48m. Profit before tax fell 34% to £1.56m, impacted by forex movements which are expected to reverse in H213. A £2.38m non-cash write-down of pre-production costs at Kilimapesa led to a net loss for the half year. £1.95m net cash and strong cash flows support a planned share buy-back programme. The gold recovery businesses in South Africa and Ghana remain the backbone of Goldplat’s business, providing cash flow for growth.

Gold resources c 1Moz base (end-2012)
Goldplat’s current resource total sits at 931koz Au. Recent exploration at Anumso in Ghana proved disappointing with a resource total of 167koz. Goldplat management has now stated it will not engage in gold projects with less than 30koz per annum production potential. Neither the Anumso nor Nyieme projects in Burkina Faso meet this criteria for further development and Goldplat is now looking at options including disposal or vending into other entities. (NB: This may result in impairment to assets).

Valuation: Revision on Kilimapesa and West Africa
Given operational losses at Kilimapesa and production from the mine halving, we have revised our valuation. In our base case, we model forecast production rates at recovery operations in South Africa, Ghana and Burkina Faso, and the Kilimapesa mine in Kenya for 11 years (FY13-23). Using a US$1,676/oz long-term gold price yields a 19.7p/share dividend discount model valuation. The sum-of-the-parts valuation equates to 24.6p/share, including the attributable value of the JORC resources at Nyieme and Anumso and the residual resource at Kilimapesa.

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