Monday, 4 February 2013

Lachlan Star: Stonecap Securities maintains Outperform rating

Lachlan Star (ASX/TSX:LSA) has had an "outperform" rating maintained by Canadian securities firm Stonecap Securities.
Here is an excerpt. Dollar values are expressed in Canadian dollars.

Outperform; Target: C$2.20, down from C$2.25

Record Quarterly Production And Signs Of Cost Improvement; Driving Towards A Profitable 2013 With Owner Mining Fleet Lachlan Star Limited (Lachlan) released its FQ2/13 (ended Dec. 31/12) operating results for its CMD mine located in Chile.

The results were largely in line with our expectations.

Highlights include the following:

- Production – Quarterly production of 13,722 oz Au, up 32% from the 10,374 oz Au produced in the previous quarter and in line with our estimate of 13,865 oz Au.
- Cash Costs – Lachlan reported C1 cash costs of $1,026/oz, up from $921/oz in the previous quarter. After adjusting for waste expense and royalties, we estimate cash costs of around $1,715/oz, down from $1,733/oz in the previous quarter, but above our estimate of $1,506/oz.
- Stacking Rate Increases By 26% – Stacking rates continued to increase with an average of 13,475 tpd for the quarter, up from 10,660 tpd in the previous quarter.
- Transitioning Towards Lower Cost – Lachlan had an operating loss of $1.84 million in the quarter. Costs are expected to decline as a result of efficiencies brought on by an owner-operated fleet. Furthermore, the company continued to show declining costs as stocking rates increased. 


We have adjusted our model to reflect the quarterly results and our net asset valuation decreased by 3% to $2.19 per share as a result of the higher than estimated cash costs.


Fiscal Q2’s production results were largely in line with our expectations, but cash costs were slightly higher than expected due to lower grades. As mining resumes from the higher grade Chisperos pit and Lachlan continues to ramp up production, we expect costs to decrease.

We are maintaining our Outperform rating with our new target price of $2.20 down from $2.25.

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