Nordgol: Positive Q313 Results

Positive Q313 results
Nordgold's, (NORD.L) Q313 financial results showed further signs of improvement, 12 November 2013 with overall total cash costs (TCC) falling 6% q-o-q to US$791/oz. This, coupled with an earlier reported increase in production, has helped to offset the lower gold price, supporting quarterly EBITDA at US$108.2m. The company targets further cost reduction to mitigate the impact of the weaker gold price.

Nordgold’s Q313 EBITDA came in at US$108.2m, a 2% q-on-q increase, supported by lower costs and higher gold output (as previously reported at 245koz). The most notable achievement was the reduction in reported total cash costs (TCC) across all mines except Taparko, leading to a 6% q-o-q drop in total TCC to US$791/oz (a 5% reduction year-on-year). At the mine level, as was expected, Lefa returned to profitability, delivering US$3m in EBITDA at US$1,223/oz TCC. In addition, the company has managed to further reduce its SG&A expense by 31% y-o-y and 20% q-o-q to US$14m. Cash flow generation has also improved, with an estimated quarterly OCF of US$102m (the record level in 2012/13) and FCF (operating cash flow less capex) of US$45m. The company reiterated its FY13 production guidance at the top end of the original range (850koz).

In all, we are positive about Nordgold’s continuing focus on cost reduction, which, coupled with a double-digit increase in production, has so far helped the company to offset a 24% year to date reduction in the gold price. However, this is yet to be properly reflected in the company’s valuation, which continues to be negatively affected by the uncertain gold price outlook.

We plan to update our financial forecasts and valuation for Nordgold shortly.

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