Manuka books record quarterly gold production

Manuka has delivered its strongest quarter of gold production yet from its Mt Boppy mine in NSW’s Cobar Basin.

Manuka Resources (ASX:MKR) notched a new gold production record in the March quarter, delivering 5,268oz at an unhedged price of $2,284 an oz thanks to record grades and high recoveries.

The result was a substantial improvement over the previous two quarters, netting the company roughly $1.6m in operating cash flow.

The stronger operating performance is expected to continue into the September quarter. Manuka anticipates a 15 per cent increase in recovered gold production compared to its IPO forecast following the resource upgrade in February this year.

The strong quarter of gold production enabled Manuka to repay $US3m ($3.9m) worth of debt, reducing its borrowings to just under $15m – down from $24.3m at the end of June last year. The company also has about $1.5m in cash in the bank.

This sets Manuka up nicely as it prepares to transition to silver production at its Wonawinta mine and realise its ambition of becoming Australia’s largest primary silver producer in the second half of 2021.

The company recently increased the confidence of the silver resource at Wonawinta substantially.

Following an extensive 14,000m infill drilling program, the resources in the highest confidence measured and indicated categories were bolstered by 43 per cent and account for 39 per cent of the total resource, up from 28 per cent previously.

Wonawinta’s total resource has grown to 38.3 million tonnes at 41.3 grams per tonne (g/t) silver and 0.54 per cent lead for 50.94 million oz of silver and 207,200 tonnes of lead.

The most recent resource upgrade paves the way for the completion of the Wonawinta mine plan and release of a maiden reserve later in the second quarter of this year.

Production is on track to begin in September, starting with the existing stockpiles at the mine.

Following the processing of the existing stockpiles, silver production from mining the Belah and Bimble pits is slated to begin in the second quarter of 2022.

Further infill drilling of specific oxide targets within the inferred resource and exploration targets will occur over the next six months.

More share price upside to come

MST Access believes Manuka is undervalued and the company’s shares should be trading at well over double the price they currently are.

Analyst Michael Bentley has valued Manuka at 99c a share – a 130 per cent increase on the 43c shares are currently fetching on market.

The 99c price target is a 5c increase from earlier valuations due to increased confidence in the Wonawinta silver project and higher forecast gold grades expected from an extension to the Mt Boppy mine.

This article was developed in collaboration with Manuka Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.