Banro’s (TSX: BAA; NYSE-MKT: BAA) third-quarter results show that the company — with expanding gold operations in the eastern Democratic Republic of the Congo — is tracking in the right direction.
The company has an aggressive mandate: expand its Twangiza mine and get its Namoya mine into production, all by year-end.
Its financial position will have to remain strong to accomplish these goals. Third-quarter earnings per share came in at negative 1¢ per share, or a $3.7-million loss, due to a US$3.2-million non-cash charge related to the fair value of preferred shares.
Given the non-cash nature of the charge, the results weren’t much of a concern to the market — and they were in line with analysts’ expectations.
In the case of an expanding gold producer, the real measure of success lies with the operations. On that front financials for the quarter were driven by 20,410 oz. gold production at total cash costs of US$821 per oz., while all-in costs tallied US$1,059 per oz.
By way of comparison, BMO Research forecasted cash costs of US$809 per oz. and all-in costs of US$1,169 per oz. The miss on cash costs was offset, however, by lower sustaining capital costs, which came in at US$5 million rather than the expected US$5.7 million.
Also positive was the fact that Banro finished the quarter with US$14.8 million in cash — a good deal more than the BMO estimate of US$9.5 million.
BMO analyst Andrew Breichmanas called the results “mixed,” pointing to positive developments at the Twangiza mine while progress at the Namoya project remained slow.
At Twangiza, Breichmanas wrote that operations appear to be improving, with plans to expand the plant to 1.7 million tonnes per year at a cost of $12 million.
Twangiza is expected to produce between 85,000 and 100,000 oz. gold this year.
Over at Namoya the news wasn’t as good. While the project is still expected to produce gold in the fourth quarter, the amount is somewhat less than anticipated. Banro had targeted production of between 7,000 and 10,000 oz. gold for the year, but it will likely only contribute 3,000 oz. gold to Banro’s overall production.
Facing challenges, the company has had to fast-track production by using two mobile crushers. Stacking the leach pad began in October, with cyanide spraying expected in November. Capex at Namoya for the quarter came in at US$30.2 million.
In his research note, Breichmanas wrote that the company is approaching an “inflection point,” but says that its “cash position and working capital deficit through the ramp-up of Namoya remain a concern.”
If financing for the aggressive expansion plan holds up, the company should produce between 225,000 and 240,000 oz. gold for all of 2014 — a lofty sum that would generate enough cash flow to allay any such concerns.
And down the road, many more ounces could be on the way. Between Twangiza, which is at the northern end of the Twangiza–Namoya gold belt, and Namoya in the south, Banro also controls the Kamituga and the Lugushwa properties.
When all properties are considered, the company has outlined a 7.01 million oz. inferred resource and 10.18 million oz. measured and indicated resources.
BMO rates Banro stock as “market perform,” with a 90¢ price target. On Nov. 13 — the day the results were released — the company’s stock was 78¢, on 98,117 shares traded.
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