Hambledon Mining: Seeks To Revitalise Its Investment Case

Hambledon Mining, (HMBGF) produced 12,673oz Au in H113, generating revenue of US$20m, at C1 cash costs US$1,055/oz. Hambledon’s net loss for H113 was US$2.3m. While 95% of gold production came from ageing open-pit operations, the newly reinstated Sekisovskoye underground mine produced 690oz at a grade of 4.04g/t Au in June and 1,187oz Au in August. The average gold grade for H113 (effectively the open pit recovered grade) was 1.45g/t Au (12% higher than FY12) at an improved gold recovery of 82.8% (5.3% higher than FY12).

Now under new management, Hambledon seeks to revitalise its investment case for Sekisovskoye by ramping-up its underground operations, and, in doing so, remove a significant amount of meteorological risk. This will allow for mining away from the extremes of Kazakh weather. Underground production also has the added benefit of greater mining flexibility and waste control, factors that have hindered the company’s open-pit operations in recent years. The open pit is expected to close in mid-2015, when all production will be from underground.

We await Hambledon’s announcement (date TBC) of a revised corporate strategy, allowing for accurate forecasts over life-of-mine to be established, greater clarity on costs and capex requirements, and thus a revision of our base case valuation. We note that in H113 Hambledon spent US$6.2m on G&A, US$3.7m on capex and holds a provision of US$10.4m for fines (US$9.4m) and costs (US$1m) related to the TD3 tailing dam leak of 2011. We also note that as at 30 June 2013 Hambledon is in breach of its debt/equity covenant – one of the stipulations of its US$10m EBRD loan agreement of 2012. While Hambledon is confident of its ability to repay this loan if ordered by the EBRD, current market conditions to raise mine capital could pose a risk to its continuing as a going concern.

To Read the Entire Report Please Click on the pdf File Below.