Monsters of Rock: 29Metals in the doghouse as cash burn continues

Copper stocks hammered with 29Metals in the bad books
African goldies report
MinRes down again but ASX materials sector lifted by gold names

Copper stocks have been hammered in a topsy turvy day of quarterly reporting with brighter stories told by African gold producers.

29Metals (ASX:29M) was, again, today’s biggest loser, with ~22% lopped off the value of the EMR Capital backed copper and zinc producer.

Problems for the Queensland and WA base metals producer really stem to the flooding last year of its Capricorn mine, now shut after lightning and rain unfortunately struck twice earlier in 2024.

The company left guidance unchanged but saw copper production slide to a more than 12 month low of 4400t in the September quarter from the Golden Grove operation in WA, with gold and silver production also down.

Zinc output rose from 15,300t to 19,100t. All in sustaining costs surged from US$2.83/lb to US$3.42/lb as lower copper grades bit.

Notably, cash burn continued, with the 29M balance falling from $85m at June 30 to $60m at September 30, raising concerns about the health of the 29Metals balance sheet with Capricorn continue to remain closed.

It continues to try work with insurers to evaluate a claim on the underground component of the mine.

“The upside was that Golden Grove generated $26m in free cash flow, but this was negated by the aforementioned spend at Capricorn,” RBC’s Paul Wiggers de Vries said.

“In our view, we expect the stock to trade lower today on the cash balance, but expect 2025 to be better as spend at Capricorn rolls off and 29M rolls into higher zinc and copper prices.”

Aurelia Metals (ASX:AMI) shares also fell over 9% as the gold and base metals miner produced 10,500oz gold, 1200t copper, 2300t zinc and 2100t lead at an all in sustaining cost of $2321/oz at its NSW mines in the September quarter.

The company’s cash balance fell from $116.5m to $103.2m after spending $17.9m on its new Federation mine and $10.4m on an environmental bond, with operating cash flow at Peak and Dargues down from $35.2m in the June quarter to $24m at the end of September.

But the company maintained its guidance for FY25 and delivered a study which suggested it will delay the restart of its 450,000tpa Hera plant in favour of spending $20-25m to expand its Peak plant from 800,000tpa to 1.1-1.2Mtpa.

The Hera plant is being held as incremental capacity for new organic or inorganic ore sources. The investment at Peak would enable the facility to take all ores from the new Federation deposit.

Out of Africa

$4bn gold name Perseus Mining (ASX:PRU) reported 121,290oz of gold production at AISC of US$1201/oz from its Edikan, Yaoure and Sissingue mines in the September quarter, taking its total to 369.690oz at US$1153/oz.

That saw notional cash flow lift from US$117m to US$127m, with the company holding US$643m in cash and bullion along with US$84m in listed securities and an undrawn US$300m debt facility.

PRU splashed the cash in the quarter on a 19.9% stake in Ivorian explorer Predictive Discovery (ASX:PDI), but offset that with the 9.6% sale of its stake in TSX-V listed Montage Gold Corp.

The miner continues to guide production for CY24 of 468,400-508,400oz at US$1182-1223/oz.

Across the border in Burkina Faso West African Resources (ASX:WAF) was slightly down after delivering 47,799oz at its Sanbrado mine at an AISC of US$1296/oz.

That saw it rake in cash flow from operations of $59m after $18m in income tax payments. WAF is on track to achieve guidance of 190,000-210,000oz for CY24 at AISC of under US$1300/oz with 155,443oz at US$1248/oz delivered this year so far.

WAF has $430m of cash and $34m on unsold gold in its back pocket with the bulk of its capital focused on delivering the Kiaka mine, where production is set to commence in Q1 2025.

The company spent $171m in the September quarter, and delivered no additional information after a scare over potential licence cancellation from the Burkina Faso Government earlier this month.

WAF eased concerns on October 8 after confirming with the Burkina mines ministry that none of its permits were under review and all remain in good standing.

Back in Australia and Boss Energy (ASX:BOE) delivered its first quarter as a yellowcake exporter, producing 89,516lb of drummed yellowcake.

It currently has two ion exchange columns operating with a third to be commissioned in the December quarter.

A first 57,000lb U3O8 shipment from the Honeymoon mine in South Australia was said to have met all converter quality metrics, with $23.4m banked from the sale of 200,000lb of uranium oxide.

Boss says it is on track to hit production guidance of 850,000lb for FY25, with the 30% owned Alta Mesa project in South Texas also opened in early October.

Materials stocks rose 0.4% with gold miners again strongly in the winner’s list. Continued concerns about a governance scandal related to MinRes’ Chris Ellison hit the lithium miner by over 5% again.