Metro set to beat production guidance
Metro Mining Ltd (ASX:MMI) could well exceed its yearly bauxite shipping guidance after another strong performance in November.
Pleasingly, management is taking a conservative stance with guidance, but mentioned that there was now a likelihood of meeting the upper end of guidance which is in a range between 3.3 million wet metric tonnes and 3.5 million wet metric tonnes (WMT).
If Metro can replicate its November performance, that would equate to 2019 production of nearly 3.7 million WMT.
Based on combined bauxite shipped in October and November, the average for the quarter is about 480 WMT per month.
If the company were to achieve at this level, the yearly shipment would be about 3.7 million WMT, a development that will be well received by investors and no doubt provide considerable share price support.
Commenting on the group’s performance for the full year, as well as the full-year guidance implications, Metro Mining managing director Simon Finnis said, “This is another very pleasing result for the team, both on and off site.
‘’We are on target to meet the upper end of guidance.
“It has been a very successful operational year and I am extremely proud of the effort and performance of the Metro team and our contracting partners.’’
Revenue generation to support Morgan’s price target of 35 cps
Interestingly, Morgans’ resources analyst Chris Brown ran the ruler across Metro Mining at the end of October.
At that stage he projected an above guidance performance, forecasting 3.6 million tonnes for fiscal 2019.
Based on these numbers, Brown expected Metro to generate a net profit of $22.1 million from revenues of $204 million.
This represents a PE multiple of 9 relative to Monday morning’s opening price of 14.5 cents.
While this appears to be extremely conservative for a company with an established operation and clear production and earnings visibility, the story is even more compelling based on 2020 metrics.
This will be the first year Metro will be producing at full tilt for the full nine month period between April and December 2020 inclusive.
Brown is forecasting the group to ship 4 million tonnes of bauxite in 2020, generating revenues of $237.8 million and a net profit of $42.1 million, representing year-on-year profit growth of about 90%.