After achieving record production of 19,000 ounces at an AISC of A$2,878 per ounce, Ora Banda Mining Ltd (ASX:OBM) is undervalued for a potential 150,000 ounces per annum producer, according to Foster Stockbroking.
In a research report, Foster said that the 11% quarter-on-quarter increase in production came despite heavy rainfall during June which impacted production by 2,600 ounces.
The company also had stronger sales of 18,000 ounces (+8%) at a better price of A$3,530/ounce (+11%), which offset the 6% increase in AISC and led to a 19% increase in revenue to A$64 million.
Foster said Ora Banda had hit FY24 production guidance at 70,000 ounces (+46% YoY) resulting in higher revenue of $214 million (+58% YoY).
Although FY24 AISC came in 12% above guidance at $2,767/ounce, it was still 10% lower YoY. The quarterly figure was impacted by lower production due to the poor weather and a one-off $3.9 million in open pit demobilisation charges.
Inflexion point
The Foster report said that the June figures reflected an inflexion point with significantly lower AISC of $2,157/ounce, producing >7,000 ounces driven by high-grade ore from the Riverina underground mine.
Due to the rainfall, unprocessed ore of 11,000 ounces was consequently stockpiled for future treatment, including Riverina stockpiles of 2,900 ounces at 3.7 g/t.
With FY25 guidance of 100,000-110,000 ounces at an AISC of $1,975-2,125/ounce, Foster said it expected a stronger FY25 driven by the underground operation as Riverina ramped up and Sand King commenced 60,000 ounces per annum production in the June quarter of 2025. The higher grades from underground are expected to displace the lower-grade open pit ore.
Sand King upside
Sand King represents further upside for OBM, according to Foster, as resources remain open in all directions with further drilling planned to extend mine life and accelerate future production.
In making its undervalued statement, Foster said the company aimed to deliver 150,000 ounces by mid-next year at an AISC of $1,740-$1,890/ounce, boosting cashflow in the current high gold price environment.
“With a market cap of $748 million, OBM trades at a 63% discount to peers with similar production (~120,000 ounces per annum), who have market caps ~$2 billion, indicating significant re-rating potential if 150,000 ounces is achieved.”
In summary the report said: “We like OBM for its expanding production, healthy balance sheet, exploration potential and top-tier management. The key focus is ramping up production at Riverina and Sand King to generate cash flow for growth.”