On Friday Kentor Gold released their Half Year Accounts and although it was not marked price sensitive, history has taught me that it is important to read all announcements as additional insight and clues into the company’s operations can be gained.
The first thing that struck me in regard to this announcement was the positive tone towards the Andash project. The wording of the announcement certainly implies that it has a strong chance of going ahead in my opinion. For example the announcement stated:
“While the Andash Gold-Copper Project in the Kyrgyz Republic awaited local approval for site access”
“At Andash, in the Kyrgyz Republic, the pre-construction phase of the gold-copper project was well advanced during the half year and is currently waiting on finalisation of geotechnical investigations for the design of building foundations and the tailings dam”
“Andash is planned to produce at a rate of 70,000 oz gold and 7,400 tonnes copper a year”
“Andash will be one of the world’s lowest cost gold mines”
Each of those statements makes reference to activities that the announcement says are planned/will be. In my opinion if management thought there was more than a 50% chance of the project not going ahead then they would have tempered their enthusiasm towards the project. This view is further supported on page 12 where it states “The directors have considered a detailed risk assessment of the project’s likely development at the half year, considering the developments in the last six months, and are confident that the project is still highly likely to proceed.”
The announcement then goes on to discuss the Australian operations but provides no new information or anything of significance in my opinion.
Another positive was however the fact that the company has $43.7 million cash on hand as at 30 June 2011 and the US$50 million debt facility from Macquarie Bank Limited. As a result the “company retained the capacity to fund the current anticipated development cost of the Andash project from the proceeds of the equity raising and the undrawn debt facility”. I therefore believe the chance of a capital raising in the near future is all but non-existent. The only circumstance in which I can see it occurring is if they may to fast track expansion (stage 2) at Burnakura while also developing Andash in order to take advantage of the high gold price.
All in all the announcement was nothing to get overall excited about, however there were some positives to be taken on board, especially managements thoughts and feelings in regard to the Andash project.
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