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Saturday, 31 December 2016

Borneo Oil’s gold mining pays off with 19,692 ounces worth RM100mil a strong proxy for gold婆罗洲石油金库增至1.96万盎司

THE steep rally in gold prices this year has helped to push up the shares of Borneo Oil Corp Bhd. 
Borneo Oil Bhd’s diversification into gold mining activities in Pahang has paid off, with its gold inventory currently worth some RM100mil.
At its July 22 close of 18 sen, the stock has outperformed the FBM KLCI with a 16% gain for the year, tracking the 25% increase in gold prices over the same period.
As at March 31, 2016, the group held 18,863 ounces in gold inventory valued at US$24mil or RM94mil (based on an ounce of US$1,280 and exchange rate of US$1 to RM3.9 then), according to the company.
Shares of the company are consistently among the most traded in terms of volume in recent months due to its nascent mining venture in Pahang which have already yielded a considerable amount of gold inventory.
The inventory rose to 19,692 ounces in April, it said in its latest monthly filing with Bursa Malaysia. At current price of US$1,262 an ounce and exchange rate of US$1 to RM4.05, the inventory is valued at slightly over RM100mil.
With spot gold now trading at around US$1,330 per ounce, the company’s total inventory is now estimated to be worth RM103.96mil.
Borneo Oil chairman Tan Kok Chor said the group had taken advantage of the surge in gold price to unload some of its gold inventories last year and reaped “handsome” profits.
As at end-June, Borneo Oil’s gold inventory amounts to 19,301 ounces, or about 600 kg.
In 2015, gold shot up to around US$1,285 per ounce from a low of US$1,050 per ounce.
In the quarter ended April 30, 2016, Borneo Oil, which also owns fast food restaurant chain SugarBun, reported a sharp jump in group pre-tax profit to RM7.6mil from RM525,000 a year ago as revenue soared to RM1.49bil from RM14.6mil
“The group holds the view that gold should be treated as a perpetual asset to back its shares and to be cashed only when there is profit or through the sale of it through gold convertibles.
Borneo Oil had attributed the substantial jump in revenue to the sale of gold investments, adding that the increase of inventory to 529 kg was due to investments in gold.
“The group is now studying how best it is to utilise this inventory,” added Tan in a yearly review of the company’s performance in the 2016 annual report.
However, there were few further details on the breakdown of its gold mining-related earnings in the company’s earnings announcement.
He said via wholly-owned subsidiary Borneo Oil and Gas Corp Sdn Bhd (BOG), the group produced some 27.35 kg of gold from its mining operations in Merapoh, Pahang, in the last financial year ended Jan 31, 2016.
“There is a lack of clarity as to how the company reported just RM6.9mil from its mining division despite the large revenue bump of RM1.48bil.
Noting that mining activities had progressed steadily in Merapoh, Tan said that during the year under review, most of the efforts had been spent on evaluating a massive presence of colluvial gold bearing soil and rocks.
“The exact nature of the so-called sale of gold investments has also not been disclosed in detail yet,” quips one analyst of a bank-backed research house.
“Intensive trenching, sampling and drilling is ongoing, and barring any unforseen circumstances, a resource report will be out in the near future,” he said.
The company said it had taken advantage of investing in gold for the past year in the belief that low gold prices were temporary as the precious metal was trading below the industry mining and production costs.
To recap, BOG was appointed by Champmark Sdn Bhd in March 2014 as its contractor to prospect and mine alluivial and lode gold on an exclusive basis in an area covering some 162 ha in Merapoh.
Later, BOG added two more mining leases in Bukit Ibam and Hulu Jelai, both also in Pahang, to its operations.
On the Bukit Ibam mine, Tan said some 1,200 ha had been mapped.
“A heap leaching pilot plant with full production capacity of 7,000 tonnes per cycle will be implemented once approval is granted for the process.
“We are confident we will recover more gold from this tenement and have set a realistic recovery target of 60% of gold from the gold bearing ores through a non-toxic leaching process,” he added.
While some may attribute the recent buying interest in the shares to speculation activity in penny stocks, particularly given the company’s vast share base of 2.37 billion, Borneo Oil has already secured some prominent backers in its ventures and is not short of cash at present.
Tan said Borneo Oil raised RM237mil from a rights issue last year, with the bulk of the proceeds to go into funding the exploration and mining of the alluvial gold.

From the proceeds, RM30mil is set aside for the purchase of mining machinery and equipment, RM15mil for exploration expenditure and some RM84mil for working capital for the mining activities within 30 months.
The Sarawak-based Hap Seng Group, which led by the Lau family patriarch Tan Sri Lau Cho Kun, is a major shareholder in the company through stakes held by several investment entities. Among them are Lei Shing Hong Securities Ltd and Victoria Capital Ltd, both of which are based in Hong Kong.
Collectively, the stakes amount to more than 40%, a part of which were acquired following a rights issue exercise in November last year which raised RM228.8mil for Borneo.
In the last financial year, the group’s gold and mining division recorded a sharp increase in revenue to RM60.9mil from RM34.4mil in 2015 while net profit rose marginally to RM7.7mil from RM7.5mil.
The company is investing in a ‘heap leaching’ plant to extract gold form the Bukit Ibam mine in Pahang following positive results of gold deposits from a six-month exploration activities.
The phase one exploration works has indicated inferred gold resources of 1,891.5 kg for Bukit Ibam. The gold resources are embedded in about 6.27 million tonnes of oxide and fresh ore.
Based on the company’s metallurgy tests, the oxide ore is suitable for the heap leaching process.
Borneo Oil said the proposed plant using “earth gold” in the leaching process had been approved by the Minerals and Geoscience Department.
Earth gold, according to the company, is a non-cyanide gold extraction agent which is environmental friendly and designed to replace sodium cyanide in the gold leaching process.
“The initial investment cost of the heap leach plant (project), including infrastructure works, is estimated to cost RM2.5mil, with an initial capacity of 7,000 tonnes per cycle.
“The plant is targetted to be completed by end of August and commercial operations will begin in September 2016,” Borneo Oil said in a filing with Bursa Malaysia.
The mining operations is undertaken by wholly-owned subsidiary Borneo Oil and Gas Corp Sdn Bhd (BOG).
Bukit Ibam, which lies within the Peninsular Malaysia eastern gold belt that extends from the north of Kelantan to Johor, covers some 485ha, of which 187ha has been issued with a mining lease.
In March 2015,BOG entered into an exclusive production sharing agreement with HDL Global Sdn Bhd for a period of 20 years.
As of April 30, 2016, Borneo Oil said it had utilised about RM83mil from proceeds of RM228.8mil raised from a recent rights issue in gold mining operation and exploration works.
The expenditures included RM66.3mil on working capital for the mining operations, RM8.9mil on exploration works and RM7.7mil for the purchase of mining machinery and equipment.
A further RM22.3mil has been set aside for the purchase of more mining machinery and equipment, RM9.3mil for working capital and RM6.1mil for exploration works.
另一方面,武吉依班(Bukit Ibam)矿场当中的1200公顷土地,已完成勘测,因此,一旦取得相关批准,一座具有7000公吨产能的堆摊浸滤厂房就会开始运作。

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