Discussion in 'Stocks & Derivatives' started by scott_reeve, Apr 1, 2013.
Took the opportunity to add to my DRM position today on the recent pullback
Sept 06 2016
DRM @ 72c bid
Partial guidance out for fy17 today, which buyers/sellers are understandably unimpressed by. My reading ...
Fy17 includes lower production and higher costs at Andy Well mine due to exhaustion of open pits and full sourcing from underground ore. All in sustainable costs (ASIC) guidance is $1300-1400 per oz for the year!
Fy17 includes production from the new Deflector mine which includes around 6 months of decline/drive development. Also impeded by the wind-up to full capacity output from the plant. Plant has to deal with the stages of processing oxide ore from pit, then transitional ore, then into the u/g sulphide ore.
For the fy17 year company is tipping only 105k - 120k ozs of gold from combined mines plus 3 - 4 tonnes of Cu
Cost guidance for the Deflector mine can only be announced when up to full speed production in the u/g sulphide ore. However, from other sources I hear ASIC for Deflector is expected to be well below ASIC for Andy Well.
A few potential positives for year(s) subsequent to fy17:
* The Gnaweeda prospect could likely improve production 'profile' for Andy Well beyond fy17
* While contribution to fy17 total production from Deflector is tipped to be 40 - 50k ozs of gold, subsequent years are expected to contribute 60k ozs
* They're proven good explorers, and have a strong exploration budget for brown and greenfield prospects
I think their AISC was substantially higher for the year primarily due to their development of Deflector/Rampant Exploration as seen by the rather low cash-cost.
Once both mines are fully operational then they should get their AISC back down to the say 140,000/oz a year @ $1000-$1100/oz area which is far more market accepting. It's been sold off heavily recently on the back of their end of year financials/gold correction.
I really like their various exploration programmes which should unlock tremendous shareholder value over the coming years. They have stated they want to get to a 300,000oz/year production profile and i'm backing them to achieve just that!
Guidance for Fy17 is 105k - 120k ozs
(Fy17 Andy Well forecasted 65k - 70k ozs
Fy17 Deflector forecasted 40k - 50k ozs)
Beyond fy17 they seem to be suggesting around 70k ozs pa Andy Well. Have given guidance of 60k ozs for Deflector beyond fy17. Equals total 130k ozs.
So where do you get 140k ozs? From additional ore Gnaweeda deposit?
The shock for me though was full fy17 cost guidance of $1300 - 1400 ASIC per oz at Andy Well as i was expecting this rate was a blow-out for a quarter or two due to fresh u/g development; not the ongoing rate.
Suggesting combined ASIC max of $1100 per oz means you either expect Andy Wells costs to drop below anything the company is so far guiding, or you expect ASIC for Deflector to level out at max of $810 per oz. Doesn't seem likely from information so far.
Say* 130,000oz plus 3-4,000t of copper.
They have mentioned trucking Gnaweeda ore to Andy Well which could be be brought to life at any point they so choose in the near future.
I'm not overly surprised with their AISC for the current year, but it will be interesting to see how the year ahead progresses when both operations are combined. A more realistic AISC might be in the order of $1200/oz after by-product credits. They are spending $15.5m on exploration in 2017 or about 7-8% of their current market cap which is a considerable amount, what i like to see, and is also adds ($15,500,000/130,000oz = $119/oz) to the AISC of their entire operation.
They have had a bad 2 months... have consolidated hard... once both mines are operation in the coming bull market perhaps $100-$200/oz variance in AISC between ASX gold producers will be p*s in a bucket?
Producing 130,000oz of gold + 3-4,000t of copper (AISC of say $1200-$1300/oz) and having multiple very interesting exploration JV's under the belt... whilst having a market cap of ~$200m sounds quite appealing to me.
IMO of course.
DRM hit 0.405 today. Down -4.7% while almost all producers are up substantially on the back of a stronger A$ gold price. Volume highest in more than a month.
Love to know what's going on of course. Most benign scenario would be the recently ex M.D dumping his stake, he was close to being a substantial shareholder with almost 6m shares.. But Doray Minerals has shown signs of information leakage in the past.
Added 10,000 of these @ 0.225 a week ago.
Not all that rational, as hardly the best way to invest $2k on the asx
Who would not be tantalized by early drilling results of the 'Da Vinci' lode? Best hit only 50 metres away from the already planned Delector drive I think they're saying. Da Vinci drill hit best result this year from an asx listed exploration company - .18.1m @ 65.3g/t Au and 0.4% Cu
Maybe they'll be able to eventually get some value back from disappointing Andy Well which will be moth-balled in November. They are also expanding the potentially mineable resource at nearby 'Gnaweeda' - 322,000oz so far, and now also has new St Annes prospect.
Change of M.D looks good so far
Sentiment: just another risky goldie punt
5 year monthly Chart - Descent decelerating, Aug and Sept neutral small bodied candles on robust volume
My long and lamentable association with this low quality goldie continues and on Friday I put a bid for 10,000 shares into the queue @ 18.5c
It's just a chart based decision as it appears for the time being the market is willing to give DRM the benefit of the doubt at below 20c. You can see on the weekly chart that volatility has quietened - small bodied candles and constricting Bollinger bands. Volume has been dropping for 5 months. Momentum has been diverging positively to price.
The MOU that Doray had with Westgold (WGX) for possible development of the Gnaweeda open pittable resource has lapsed but there are still conceivable positives there and at the mothballed u/g Andy Well mine and plant; the more so if gold price rises. Meanwhile no bad news out of Deflector mine and plant and the exploration there and at contiguous Da Vinci lode offers hope. Debt load strikes me as a big risk.
Disc: holds and trying to buy more
Sentiment: poor quality, high risk but with speculative charting appeal
From short term daily perspective, bullish as f#k. Price pressing up against 20c resistance (has had a trade or two @ 20.5c already). 791,000 trades, good volume early in the day.
DRM chart update
DRM threatened a breakdown from a mini Head and Shoulders on the daily chart yesterday but seems to be recovering. The company reported on its Dec Quarter on Monday. A quite positive report which made the market action surprising to me. March Quarter will be exciting for holders when a drive will poke through an intervening dyke into the bonanza grade 'Da Vinci' lode.
DRM December Qtrly Notes
ASIC was $1,185/oz with steep reduction of costs from month to month. The ASIC for the single month of December was only $991.
Cash and metals at end of December Qtr was $23.9m, debt was $47.5m, net debt was $23.6m
Comparing this to the prior September Quarterly report, all measures improved. I was hoping for more debt retirement, but there was modest improvement in cash/metals despite development demands and Andy Wells shutdown.
DRM Sept Qtrly ramp up ASIC was $1541
Cash and metals at end of September Qtr was 19.8m, debt was $48m, net debt was therefore $28.2m
Bought this in low 20 and this could be my wild card by end of this year if the current progress is maintained at this momentum....lets hope for the best.
Wild card is a fair term for it LD, and 20c is an excellent price if you're up for the risk of DRM. The strongest support/ resistance is exactly 20c. My own average is about 49c due an early stupid fomo buy.
My biggest concern over DRM was allayed by this Qtrly which stated that the company repaid the bank only $0.5m before adding $4.1m to its cash and metal balance. My takeaway, DRM is under no pressure from its lender.
It's a more competent and transparent company under Leigh Junk compared to the previous m.d. I feel I've got a decent chance of getting my investment back at the least.
With a stronger gold price, which I anticipate, not only will Deflector become more profitable but the 'optionality' of mothballed Andy Wells and the Gnaweeda project should come alive. Andy Wells still has a u/g resource left of 500,000ozs @ 8.8g/t and Gnaweeda's open pittable resource was up to over 300,000ozs @ 1.8g/t and still looking. They just need to be patient enough to keep trickling out the care and maintenance cost for the plant and pottering around at Gwaneeda till arrival of A$2,000 gold or whatever.
Sold out of DRM today, 30,000 @ 30.5c for a loss of 5 grand approx
The late buys @ Av 20.5 blunted my shocker first buy @ 1.05
So that's the second time the Doray Minerals enterprise has taken money off me; definitely the last.
Very hard decision to sell because the price chart is not signalling a sell. Also I devoured the comments over at h.c after the March Quarterly release this morning and the posters there all sound dopily happy at the Report. According to management it's been a record successful quarter and a few posters on h.c gleefully jumped on the reported aisc of $986/oz.
What stood out for me though was the cash position is again at a standstill. The only improvement to their debt came from $20m used from the equity raising. Oganically they've added almost zero to their cash balance from mining. So for me the true aisc is every [email protected]*kg dollar that they got from mining, processing and selling the gold and the copper concentrate. They're still treading water furiously from what my dim vision can perceive. Management:1 Shareholders:0, the old story.
Really sorry to hear of your experience. DRM should be doing much better. I still have a small holding , but really have to wonder what is going on with the people running a lot of these companies.
Cheers, yes, the managements of gold mining and exploration companies are the number 1 consideration.
I think the current M.D of DRM is not too bad but could be obscuring deeper issues in what he doesn't say. But who knows? I still don't get it that noone is mentioning the lack of free cashflow in an operation that is supposed to be up to full speed and mining good grade. Am I misreading it?
The weekly share price chart of DRM is still looking ok at the end of this week, even prospective, but the monthly chart is looking more ambivalent. I'd be chewing my nails in suspense if still a holder.
On a personal level I'm still in the game with holdings in NST, RMS and RRL. Even CDA and GNG which I hold have indirect leverage to the price of gold I would say.
The break above the 30c level by a strong weekly candle on good volume looks bullish for DRM. The moving averages approximate the 50 and 200 dma's.
The monthly chart is also shaping up well.
Absolutely no 'technical' concerns for holding DRM that I can see.
I hope they can turn things around. I currently have DRM in the same camp as BLK and HAV... disappointing!
NST, EVN, SAR, DCN, RMS doing much better.
Those are all good picks if you're holding imo - jury still out on DCN.
I have lost too much investing in pipe dreams spruiked by scummy exploration/development small caps to take them seriously anymore. I like the quote from the M.D of Northern Star, "A business first and a mining company second", and he went on to compare Northern Star's Return on Equity (ROE) favourably to Woolworths, BHP, WES, and CBA, lol.
There are also profitable dividend paying mining services companies that count gold miners among their clients that are worth considering - at the right price of course.
DRM chart update:
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