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New Century Resources (ASX:NCZ) has announced the commencement of production at its Century zinc operation in Queensland. Highlights of the announcement include the following.
Analyst comment: The fact that production at the Century mine has begun a little over 12 months since New Century took control of the project is impressive, especially considering the number of milestones achieved during that period. This includes financing, recommissioning, refurbishment, two production studies as well as the recruitment of more than 350 staff at site during the project’s refurbishment.
That said, the real work for the company begins now as it ramps up to name-plate production.
Whilst there are numerous factors which could potentially take longer than anticipated during this ramp up phase, we see the most critical will be meeting the concentrate product specification (a zinc concentrate grade of between 51 and 54.5% Zn). Achieving it ensures revenue generation without penalty, which could see meaningful revenue during the current quarter.
We believe that once significant revenue is generated (possibly as early as the December quarter), investors will see it as reducing the project’s risk profile, with a re-rating of the company’s share price likely.
The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Valuation: we maintain our previous long term valuation for NCZ at $3.32/share (share price $1.17). However, in light of high volatility in the zinc price over the past six months (it has traded between US$1.12 and US$1.62/lb and is currently $1.16/lb), we should note that at the current zinc price (LOM), our valuation reduces to $2.85 / share. We will review our key assumptions, including the zinc price, in the coming months.
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