New Century Resources Ltd (ASX:NCZ) has had its buy recommendation reiterated by Foster Stockbroking with a price target of $4.30/share (current price: $1.30/share).
The research update was released after the company achieved a monthly production record in July at the Century Mine in Queensland, with 12,109 tonnes of zinc metal at 51% recovery.
New Century also recently delivered an ore reserve containing 246,000 tonnes of copper and 198,000 ounces of gold at the Mt Lyell Copper Mine in Tasmania, demonstrating the scale of opportunity and re-establishing Mt Lyell among Australia’s top copper mines.
Foster Stockbroking maintains the view the market is ascribing nil value to the exciting green copper option that Mt Lyell presents – nor the mine life extension from the Century In Situ expansion for that matter, even as strong zinc prices underwrite near-term cash generation from the Century operation.
The following is an extract from Foster’s research update:
Event:
- Century operations update; solar power MoU.
- Strong start to FY23 Century operations: Century set a new monthly production record since restart in July with 12,109t zinc metal at 51% recovery. Operational momentum has carried on into August with 11,768t zinc metal at 50% recovery. No further detail disclosed at this stage on what is driving the improvement.
- Improved recoveries are also encouraging, noting that incremental zinc recovery improvement had already improved to 48.0% in FY22Q4a, and has been above 50% for the prior two months. No FY23 production guidance at this stage, no update provided on unit costs at this stage.
- Renewable solar power supply MoU signed: NCZ has also announced a nonbinding MoU with APA Group (ASX:APA) for the supply of up to 8MW solar power to the Century Mine from the 88MW Mica Creek Solar Farm, which is under construction, and operational by late FY23. The solar power alternative has the potential to reduce carbon emissions from power generation by up to 10%.
- Cash and concentrate of $108M at June end and no debt.
- We have unchanged FY23-FY24e NPAT to $45M and $71M, with unchanged FY23-24 zinc assumptions of US$1.43/lb and US$1.34/lb on FY23 production of 124kt zinc with the addition of In Situ production in both lead and zinc in FY24e.
- Sustained improvement in production and recovery represent near term upside risk to our FY23 assumptions should bright FY23 start be maintained. We continue to model 46% recovery at Century tailings and maintain C1 cost of ~US$0.90/lb in FY23-24 for now, though continued volume lift would drive unit cost improvements. NCZ will also look to continue efficiency and operational improvements to offset inflationary pressures.
- We have an unchanged valuation for NCZ of $4.30/share, as the company works toward incorporating the In Situ Century extension and Mt Lyell option. We continue to be encouraged by the most recent operational update demonstrating improving metrics.
- We reiterate our Buy recommendation for NCZ with a PT of $4.30/share (no change), in line with our DCF valuation. We maintain the view the market is ascribing nil value to the exciting green copper option that Mt Lyell presents – nor the mine life extension from the In Situ expansion for that matter, even as strong zinc prices underwrite near term cash generation from its Century operation.
- NCZ’s environmental credentials strengthened by solar power energy source, and earned through its Century asset management, and we think will be further highlighted as it develops green copper project Mt Lyell.
- Key catalysts for the stock include: 1) ongoing operational performance at Century and upcoming In Situ expansion; 2) continued strength in base metal prices; 3) updates on Mt Lyell Resource and Reserve, feasibility study release in 2H22, and option exercise; and 4) exploration updates.