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Leagold's Q2 fails to dent FY production ambition

Leagold Mining says it remains on track to achieve its full-year 2019 production guidance despite a dip in June quarter output.
Leagold's Q2 fails to dent FY production ambition Leagold's Q2 fails to dent FY production ambition Leagold's Q2 fails to dent FY production ambition Leagold's Q2 fails to dent FY production ambition Leagold's Q2 fails to dent FY production ambition

Leagold Mining is fully funded for its planned Los Filos expansion

The South America-focused precious metals company has reported 14% lower June quarter production of 91,000oz gold, compared with the March period (106,000oz). It said March quarter output benefitted from strong leach kinetics at Los Filos, which were not repeated in the latest period.

Year-to-date production of 197,234oz is in line with Leagold's 380,000-420,000oz full-year target range.

CIBC Institutional Equity Research analyst Bryce Adams said pending the company's full financial report for the second-quarter scheduled for publication on August 1, Leagold remained a higher-cost producer with all-in sustaining costs of US$920-$970/oz expected for 2019.

"Q1 costs were in line with guidance and if Q2 follows the same way, we would be inclined to lower our cost estimates," Adams said in a note to clients.

He remained cautious, saying Leagold and its Brazil assets continued to be a "turn-around story".

"Furthermore, Newmont and Yamana [Leagold ownership] positions became free trading in Q2/19 and the company announced a gold hedge programme in conjunction with the financing, which we see as limiting potential future upside with spot prices over $1,400/oz and the outlook for gold continuing to strengthen," said Adams.

Leagold recently announced a refinancing including a $200 million term loan and $200 million revolving credit facility. In May it said it had arranged hedging cover for 25,000oz per quarter from the fourth quarter this year to the third quarter of 2022, representing about 20% of production. The three-year gold hedge programme includes 135,000oz of collars from $1,325-$1,430/oz, with an additional 165,000oz of forwards at $1,350/oz.

Leagold expects the new loan facilities to fully fund its growth plans to expand Los Filos and build the Santa Luz mine in the quest of achieving a 600,000-700,000oz/y production profile.

Despite a 27% year-to-date gain, Leagold's (TSX:LMC) Toronto-listed equity is at C$2 compared with a 12-month high of C$2.69. Its current market value is $583.94 million.