Cradle Arc jumps as Mowana approaches break-even- still time to buy? (CRA)

By Richard Mason


Cradle Arc (LSE:CRA) shot up 11.3pc to 6.4p today after reporting that it expects to now be project level operational cash flow break even at its flagship Mowana mine thanks to its accelerated development plan. The company’s ramp-up at Mowana – where it is the 60pc owner – began in April after it raised $10m of secured debt funding.

In today’s update, the firm revealed that the mine is expected to reach breakeven in June, thanks to the production of approximately 650 tonnes of contained copper in Q2 2018. Cash generation is then expected to improve further throughout the year as the continued development of activity leads to predicted production of at least 5,7000t of contained copper in H2 2018.

According to the company, it mined c.1.1 million tonnes of ore and waste in Q2 2018, with these rates expected to double in Q3 2018 to finally reach 3 million tonnes in Q4. The firm will install a third mining unit at Mowana by the end of this month and a fourth unit by the end of September to support this additional activity.

Last month saw Cradle Arc report the results of its first ore reserve estimate for Mowana, which revealed total contained reserves of 31.8Mt at 1.17pc copper for 370,800 tonnes of contained copper metal. These figures give the project an NPV of $272.8m based on average life of mine cash costs of $4,099 per tonne of copper and all-in sustaining costs of $5,038 per tonne of copper.

The update also revealed that Mowana supports the installation of a Dense Media Separation (DMS) unit that can double copper in concentrate production to 21,000 tonnes pa. The business is yet to make a final decision on whether to carry out the DMS work, but this will no doubt mark a key milestone in the site’s development.

Kevin van Wouw, chief executive of Cradle Arc, said: ‘Our new development approach for the Mowana mine is now delivering the increased production planned as a result of the accelerated mine plan announced in April 2018. Although it is still relatively early in the ramp-up stage of operations under the company’s revised mine plan, I am delighted that the key performance criteria set by the board are currently being met and backed-up by actual operational data. This is an opportune time to be bringing on additional production to the copper market – positioning the company to take advantage of currently tight global supply conditions.’

When spoke to van Wouw in April, we wrote that the CEO’s confidence in the DMS upgrades going forward could make it attractive buying opportunity at its 6.9p share price at the time. Shares now sit at 6.4p despite today’s rise, down considerably from the 9.5p they sat at when we last covered the firm at the end of May. With today’s results showing plenty of promise, it could be worth taking advantage of this weakness.

Author: Daniel Flynn

Disclosure: Daniel Flynn does not own shares in the company mentioned.


Author: Richard Mason

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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