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Gold Producer Maintains Full-Year Guidance Despite Challenging H1/21
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Even though to meet this guidance, Kopy Goldfields must achieve significantly higher production in this year's second half, "we believe H2/21 will show such growth," an Edison Investment Research report noted.

In a Sept. 1 research note, Edison Investment Research analyst Alison Turner reported that Kopy Goldfields AB (KOPY:ST) posted "a competent set of H1/21 results" despite a challenging start to 2021, and growth remains on track for full-year 2021 and longer term. Kopy is a Sweden-based company with hard-rock and placer mining operations in Russia.

Turner reviewed Kopy's H1/21 results. Production was down 14% in the year's first half as the company dealt in Q1/21 with a COVID-19 outbreak at Yubileyniy, one of its producing mines. Total H1/21 production from all of its operations was 20,700 ounces (20.7 Koz) of gold equivalent, down from 24.1 Koz in H1/20.

In Q2/21, Kopy also experienced some concentrate transportation delays due to inclement weather. However, it managed to ramp production up 69% and produce a total 13 Koz.

Despite these adverse events, Kopy's H1/21 EBITDA was US$14 million (US$14M), lower than its US$17.8M EBITDA a year earlier, due to decreased gold sales. The company's H1/21 EBITDA margin also fell short at 38% versus 40% in H1/20. Turner noted that Kopy tamped down costs such that they were lower year over year, at US$859 per ounce compared to US$861.

At the end of H1/21, Kopy had US$0.9M in cash, US$13.9M in available undrawn facilities, and 5.25 Koz of sellable gold. Net debt was US$59.6M.

Turner noted that Kopy's capital investment program "remains on track and is fully funded by existing debt facilities." The three major projects underway are the addition of a second flotation line at Yubileyniy (commissioning slated for early Q4/21), a new heap leach at Perevalnoe (commissioning expected by year-end 2021), and a new mine at Malyutka (expected to come online in 2023).

The analyst highlighted that Kopy maintained its full-year 2021 production guidance of 56 to 59 Koz and cited reasons why the company most likely will achieve. They include the additional production expected this year and Kopy's built-up gold inventory.

"We now forecast 2021 gold equivalent production of 56 Koz, at the lower end of the guidance range (previously we forecast 59 Koz) and gold equivalent sales of 57 Koz (previous forecast 61 Koz)," wrote Turner.

The outlook for Kopy's production longer term is also positive, Turner noted. By 2025, the company aims to grow its yearly production to 100 Koz of gold. Further, exploration is continuing at Kopy's joint venture project, Krasny.  

"With two of those three projects set to come online before the end of this year, the company should start to see greater recognition of the strength of its growth profile within the next year as the significant investment begins to flow through to production and cash flows," Turner wrote.

Kopy is currently trading at about SEK1.88 per share.


1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Edison, Kopy Goldfields, September 1, 2021

This report has been commissioned by Kopy Goldfields and prepared and issued by Edison, in consideration of a fee payable by Kopy Goldfields. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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