{"id":54127,"date":"2008-04-15T12:48:14","date_gmt":"2008-04-15T02:48:14","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2008\/04\/15\/sino-golds-transition-comes-with-hiccups\/"},"modified":"2008-04-15T12:48:14","modified_gmt":"2008-04-15T02:48:14","slug":"sino-golds-transition-comes-with-hiccups","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2008\/04\/15\/sino-golds-transition-comes-with-hiccups\/","title":{"rendered":"Sino Gold&#8217;s Transition Comes With Hiccups"},"content":{"rendered":"<p>  <title>sgx-quarterly<\/title><\/p>\n<p>By Chris Shaw<\/p>\n<p>As one way of playing direct exposure to China&#8217;s demand for natural<br \/>\nresources given its gold mining operations in that country Sino Gold<br \/>\n((SGX)) has enjoyed something of a dream run in recent years, having<br \/>\nrisen from less than $2.00 per share in 2005 to almost $9.00 per share<br \/>\nrecently.<\/p>\n<p>But in the view of Macquarie the company may now need to deliver a<br \/>\ncouple of solid quarters of production to undo the damage done<br \/>\nyesterday when the group revealed lower production guidance and grades<br \/>\nand higher costs at its core Jinfeng operation. <\/p>\n<p>Production for 2008 is now expected to be in the order of 150-160,000<br \/>\nounces at cash costs of around US$370 per ounce, which compares to<br \/>\nprevious guidance of 170-190,000 ounces at US$300 per ounce and<br \/>\nMacquarie&#8217;s previous forecast of 185,000 ounces at US$314 per ounce.<\/p>\n<p>While recent power outages at the Jinfeng operation provide something<br \/>\nof an excuse Merrill Lynch suggests the revised guidance is a<br \/>\ndisappointment, largely as it reflects lower grades at the mine. The<br \/>\nbroker notes this trend will continue, with grades now expected to<br \/>\naverage 4.4 grams per tonne gold, down from 5.1 grams per tonne<br \/>\npreviously. On the plus side total resources and reserves have<br \/>\nincreased, the former up 16% to 5.3 million ounces and the latter up by<br \/>\n11% to 3.5 million ounces.<\/p>\n<p>To factor in the revised production expectation the broker has cut its<br \/>\nearnings forecast for the full year by 23% to US$23.1 million, which<br \/>\nwhen converted to Australian dollars implies earnings per share (EPS)<br \/>\nof 9.4c this year. This is broadly in line with Macquarie&#8217;s revised<br \/>\nforecast, its 38% cut to EPS this year resulting in an expected outcome<br \/>\nof 10c.<\/p>\n<p>Despite the hit to earnings forecasts both brokers retain their Buy<br \/>\nratings on the stock, Macquarie noting the project pipeline including<br \/>\nWhite Mountain, Eastern Dragon and Beyinhar means the company should<br \/>\nemerge in a few years times as a 500,000 ounce per year producer at<br \/>\ncash costs of around US$300 per ounce. Having said that the broker<br \/>\nacknowledges the group faces a tougher time as it moves from delivering<br \/>\non exploration expectations to production expectations, which is<br \/>\ngenerally more difficult.<\/p>\n<p>Merrill Lynch agrees, pointing out the White Mountain project remains<br \/>\non track and on budget for first production early next year<br \/>\nwhile&nbsp;the initial 10-year mine life is seen as likely to be<br \/>\nextended given the resource remains open at depth and along strike.<\/p>\n<p>As well the broker&nbsp;takes comfort in the fact the company is in<br \/>\na net cash position yet is trading at around net asset value (NAV),<br \/>\nwell below its Australian peers at around 1.5x and north American<br \/>\nmid-cap gold producers at closer to 2x NAV.<\/p>\n<p>The cuts to earnings forecasts have seen Merrill&#8217;s price target fall to<br \/>\n$8.00 from $9.00 and Macquarie&#8217;s to $9.00 from $10.00, while GSJB Were<br \/>\nand Aspect Huntley are the others in the FNArena database to rate the<br \/>\nstock and both have most recent recommendations of Hold, Were&#8217;s with a<br \/>\nprice target of $7.30. <\/p>\n<p>Shares in Sino Gold today are slightly weaker and as at 12.15pm were<br \/>\ndown 16c at $5.55, which compares to a trading range for the past 12<br \/>\nmonths of $4.55 to $8.87.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sino Gold&#8217;s quarterly report included lower production forecasts and higher costs but Merrill Lynch and Macquarie remain positive given the growth potential in the group.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[22],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54127"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=54127"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54127\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=54127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=54127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=54127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}