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Petaquilla announces higher than expected FY2Q gold production

Zacks Equity Research

Petaquilla announces higher than expected FY2Q gold production

By Steven Ralston, CFA

This week Petaquilla (T.PTQ) announced preliminary results for the second fiscal quarter ending November 30th. For the first time, quarterly gold production exceeded 20,000 ounces as ounces poured increased 12.0% sequentially to 20,025. Gold equivalent production increased 11.2 % sequentially from 18,459 ounces to 20,518 ounces. We expect production to ramp up during the third fiscal quarter since the completion of the gold plant’s capacity expansion program was announced on November 27th. The mill’s capacity is being increased approximately 30% through the installation and commissioning of a fourth ball mill, along with two LIX leach tanks, two carbon-in-pulp (:CIP) tanks, a third thickener and a second electro-winning circuit.

During the second fiscal quarter, the company sold 17,545 ounces of gold and 31,400 ounces of silver generating revenues of $28.2 million. Approximately 1,590 ounces of gold were inventoried, which raised the total amount of gold inventoried to 6,270 ounces. With the cash cost per ounce of gold sold remaining below $600, the company's cash position increased 29% sequentially to $16.5 million.

In addition, Petaquilla recently filed a NI 43-101 compliant technical report on its Palmilla gold project on SEDAR. The report includes an estimated inferred resource of 502,800 gold equivalent ounces composed of 318,500 ounces gold (19,725,000 tonnes grading 0.50 g/t Au), 345,600 ounces silver (19,725,000 tonnes grading at 0.54 g/t Ag) and 80,368,000 pounds of copper (19,725,000 tonnes grading 0.18% Cu). The resource estimation utilized the drilling results from 21 holes drilled by Petaquilla in 2012 and 23 holes drilled by Adrian Resources between 1994 and 1996. The resource continues to be explored as Petaquilla has now completed drilling of at least 37 out of 42 planned holes in the drilling program.

During the current fiscal year, management expects additional NI 43-101 compliant resource reports to be completed, specifically for Oro del Norte in Panama and Lomero-Poyatos in Spain.

We reaffirm our Outperform rating and our price target of $1.75, which reflects the inferred resource of the Palmilla deposit in the Belencillo concession.


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