Back on 28 October 2011, CNMC Goldmine became the first Catalist-listed gold producer on the Singapore Exchange (SGX). Its flagship project, the Sokor Gold Field covers 10 km2 in Kelantan, Malaysia, and has been producing gold for more than a decade – since its first gold pour on 21 July 2010.
CNMC Goldmine sells its gold dores (a type of semi-pure gold alloy that needs to be further refined) to licenced buyers in Malaysia. As its mines also contain significant amounts of silver, lead and zinc, it has broadened its portfolio in 2022 to create new revenue streams to sell lead and zinc internationally.
For investors who are interested in gold investments, CNMC Goldmine can offer another way to gain exposure to the yellow metal. Here are 5 things you should know about CNMC Goldmine.
#1 CNMC Goldmine’s Net Profit Has Been Steadily Increasing Since 1H 2022, Reaching US$5.5 Million In The 1H 2024. What Have Been The Key Drivers Of Growth?
Rising gold prices in recent years have given a significant boost to our bottom line. Prices of the precious metal have been going up for various reasons. These include strong buying interest by central banks worldwide as they sought to diversify their reserves and reduce dependency on the US dollar, as well as gold’s perceived status as a safe-haven asset and as a hedge against runaway inflation.
Other key drivers of our profit growth since 1H 2022 include increased production and sales. Our carbon-in-leach (CIL) plant produced 9,357.02 ounces of fine gold in 1H 2024, up 27% on year. We also started recognising revenue from the sales of lead and zinc concentrates in 2023, which are a new source of income.
An independent consultant for our Sokor Project has provided mineral resource estimates for 918,000 ounces of gold from both CIL and flotation processing, as of 31 Dec 2023. We have also received resource estimates for 6.9 million ounces of silver, 76,850 tonnes of lead and 96,270 tonnes of zinc.
We are in the process of adding additional capacity to our carbon-in-leach (CIL) plant, which is our main gold production facility at the Sokor Gold Field. The expansion will cost up to RM9.0 million and increase the CIL plant’s processing capacity to 800 tonnes of ore per day from 500 tonnes per day currently. This exercise will be fully funded using internal resources and is expected to be completed by the first half of 2025, barring any unforeseen circumstances.
We are also building another underground gold mining facility at Sokor. Expected to be completed by next year, this facility will enable us to extract more higher-grade gold ores for processing at the CIL plant.
#2 Who Are Your Key Competitors In This Sector, And How Does The Group Differentiate Itself From Competitors In The Same Space?
Mining companies, including ours, generally hold their own mining concessions or rights, and do not encroach upon each other’s territories. As a result, there is no direct competition like in most other industries.
Moreover, gold has strong and consistent demand globally. This ensures, that all gold miners find their market regardless of regional differences. In this sense, there is no direct competition among us.
#3 Given That A Large Portion Of CNMC Goldmine’s Revenue Is Tied To Gold Prices, How Does The Group Manage The Potential Volatility?
As a mining company, we are a price taker. We have no control over gold prices, which are determined by market forces. What we can reasonably control to a certain extent, though, is our operating costs, which we keep a very close watch on as we want to be able to generate a profit margin even if the price of gold comes down. We do not hedge the selling prices of our gold bars. Whatever we produce, we sell at the prevailing spot rate.
Having said that, we are mindful of being solely dependent on gold as our source of revenue. We have been fortunate that our flagship mine also contains other metals besides gold. We diversified into the production of lead and zinc in 2022 and started exporting them the following year. This additional source of revenue has since become a contributor to our bottom-line.
In 2017, we also acquired two mining properties in Kelantan with 51% interest in CNMC Pulai Mining and 100% interest in Kelgold. At this time, both the Kelgold and Pulai projects remain in the exploration stage.
#4 Why Should Investors Take A Closer Look At CNMC Goldmine?
We are among a few junior gold mining companies that consistently generate profits and pay dividends. We believe investors have yet to fully appreciate our value proposition. There are many mining companies worldwide with projects much larger than ours, but quite a lot of them are still in the exploration phase and have yet to monetise their mineral reserves and resources.
Mining is a very capital-intensive and high-risk business, but we have a proven track record in terms of profitability and of sharing the fruits of our labour with shareholders. A lot of work has gone into getting our flagship project off the ground. Not only have we succeeded in discovering and producing gold, but we have done so in a way that is commercially viable, achieving profitability in nine out of the past 10 years.
We maintain a dividend policy that typically allocates up to 30% of our annual earnings as dividends. Over the past decade, the only year we did not pay dividends was during the COVID-19 pandemic in 2020, when the Group incurred a loss. This was a result of global lockdown measures, including those implemented by Malaysia, aimed at controlling the spread of the virus.
On various occasions, we have also distributed significantly more than 30% of our earnings as dividends. Specifically, in 2023, we paid out 66% of our earnings to shareholders, demonstrating our strong commitment to rewarding investors.
#5 Sustainability And ESG Have Increasingly Been A Key Focus, How Is The Group Committed Towards Sustainability?
As climate change wreaks havoc globally, we have to be even more mindful of our mining practices and ensure that they do not contribute to the harm unfolding worldwide.
We are committed to mining gold and other metals following industry best practices and in a manner that respects the environment and all our stakeholders, including the residents living near the area in which we operate.
Our ESG focus aims to align with UN Sustainable Development Goals. We make it a point, for instance, to minimise waste generation. One way we do this is by using overburden – rock or soil overlying a mineral deposit – to backfill our mines and fill roads with non-hazardous tailings.
Also, water used for operations is often treated and reused instead of discharging it into the environment. As part of our ongoing efforts to manage and reduce our carbon footprint, we have integrated more energy-efficient power generators into our operations. Additionally, we are actively collaborating with our equipment suppliers to explore the possibility of utilising larger capacity heavy equipment. This strategy aims to reduce the total number of machines required on-site, further enhancing operational efficiency and minimising environmental impact.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 15 October 2024 and republished with permission. You can read more about CNMC Goldmine Holdings (SGX: 5TP) on the SGX website.
Read other featured companies from SGX’s 10 in 10 series on the DollarsAndSense website.
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