Genesis Minerals drops after outlining strategy
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The news: Genesis Minerals is among the biggest losers on the ASX 200 today after it published its strategy plan for the next five years.
The numbers: Released late on Thursday, the gold house's strategy includes an upgrade to its FY24 production guidance to 130-140 koz (thousand ounces) up from 120-130 koz.
It also noted that its resources and reserves would underpin significant growth in production and had an implied mine life of 10 years at 300 koz per annum based on re-built reserves. The company had an aspirational goal of 400koz per annum.
The company’s shares were down 6.15% to $1.80 on the ASX by 2.29pm AEDT.
The context: Following the publication of the plan, Shaw and Partners analysts retained its ‘buy’ rating on the gold house and its target price of $2.20.
The analysts said with $192 million cash and bullion at the end of December and no debt, Genesis was well positioned to fund sector-leading, profitable production growth. They noted the company was making substantial investments to build new projects and infrastructure and ramp-up production.
However, Shaw and Partners warned that interest rate movements would be the most significant catalyst for gold prices in 2024 and 2025.
“The long-term relationship between gold and rates suggests that for every 100 basis points drop in US 10-year real rates, gold rallies by 11%,” they said.
Despite the analysts' overall positive view of Genesis they noted that a number of the company’s resources were not producing yet.
“There is a risk the company is unable to bring the operations into production. The projects may cost more than expected to build and may not operate as expected,” Shaw and Partners said.
“Costs are elevated in the WA mining industry. While easing, these costs are factored into company guidance and our forecasts, but may remain elevated for longer than expected.”
The sources: ASX announcement, Shaw and Partners research
