PanAust Limited (PNA) Stock To Watch


PanAust LogoPanAust (PNA) is a mid tier miner that holds mineral assets in Laos and Thailand.

In Laos, PanAust operates the large Phu Kham copper-gold operation, which commenced production of copper-gold concentrate in April 2008. The Ban Houayxai Gold-Silver mine which is also located in Laos commenced commercial production in June 2012.

First half results

PNA reported a first-half net profit of $65.7 million, which was a 5.4% fall on the prior corresponding period. The fall came despite a 1.5% rise in revenue to $306.2 million, with a sharp fall in copper and gold prices to blame for the differential.

On the positive side PNA announced a maiden interim dividend of 3 cents a share, as it wraps up a two-year, US$450 million capital expenditure program.

The company reiterated its full-year production guidance of around 64,000 tons of copper, 135,000 troy ounces of gold and 650,000 ounces of silver.

Growth

As mentioned the group has spent US$450 million on capital expenditure which should hopefully result in further production growth.

PNA recently upgraded certain facilities at its Phu Kham mine and as a result, copper production is expected to rise to between 65,000 tons and 70,000 tons in 2013.

Gold production is also expected to increase by 7,500 ounces. The Ban Houayxai Gold-Silver commenced commercial production in June 2012. The second half is expected to deliver over 65,000oz of gold at a cash cost of approximately US$500/oz after silver credits.

Gold and Copper markets

gold prices july to september

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copper prices july to september

The above two charts show the spot price of gold and copper since the start of July.

Both commodities have moved strongly higher, both boosted by the US announcing further quantitative easing.

China manufacturing data continues to be weak. This was today characterised by the reading of the HSBC’s Flash September Purchasing Managers Index, which was 47.8.

A reading below 50 indicates contraction.

As such we believe that these continued weak numbers will force the Chinese government into action and provide further stimulus, which in turn will see commodity prices continue to strengthen.

Outlook

PNA produced solid 1H results despite the fall in profit which was due to falling commodity prices.

The company is moving into an interesting phase with much of the previous year’s capital expenditure beginning to pay dividends in the production sense.

We also think that the positive momentum surrounding gold will continue over the next few months, providing further support for PNA shares.