Bellzone Mining's (BZM) half-year results highlight the company's transition from development mode through to planned production later this year. The west African iron ore miner is still exposed to ramp-up risk at its joint-venture Forecariah opencast mine, while projected costs at the Kalia project are in advance of initial estimates, but the potential upside from these projects still outweighs the risk factors.
Bellzone's operating loss increased by a quarter on the 2011 half year to $25.5m (£15.7m), but the focus is now on delivering first iron ore production from Forecariah during the fourth quarter before ramping up to an annualised rate of 4m tonnes by 2014.
Capital expenditure at Forecariah is largely complete, although net cash at the end of September had fallen 30 per cent to $70m since the half year-end. Nevertheless, Bellzone is confident that the $80m phase 2 ramp up at Forecariah will be funded through operational cash flow, while the development of the huge 6bn tonne resource at Kalia will rely on capital from Bellzone's partner in the region - China International Fund (CIF) - so the board does not anticipate going to the market for funding. CIF's interest is understandable given that the definitive feasibility study gave Kalia an estimated net present value of $7bn.
Panmure Gordon has a risked sum-of-the-parts valuation of 26p a share.
| BELLZONE MINING (BZM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 13p | MARKET VALUE: | £95m | |
| TOUCH: | 13-13.25p | 12-MONTH HIGH: | 39p | LOW: 12p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 29¢ | NET CASH: | $101m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | nil | -18.8 | -2.93 | nil |
| 2012 | nil | -25.9 | -3.60 | nil |
| % change | - | - | - | - |
£1=$1.62 | ||||
