Update: Beadell Resources Earnings

Aug.27.14 | About: Beadell Resources (BDREF)


Beadell reported weak earnings today, with an EPS of just $0.02/share for H1 2014.

This was expected, as the rain season in Brazil has caused operational difficulties.

The investment thesis remains standing, as the second half of the year should yield very strong operating results.

Beadell Resources (OTCPK:BDREF), one of my favorite gold producers in the world, has released its financial results for the first half of 2014. As expected, the results weren't that great because of the heavy rainfall in the first half of this year in Brazil. Revenues were 'just' $100M on the sale of 69,240 ounces of gold which still is a very respectable 18.5% production increase. The EBITDA came in at $42M. This doesn't sound too exciting, but as I explained before, the heavy rainfall caused Beadell to downscale its plans, as it had to truck ore with smaller trucks and had to blend its higher grade ore with ore coming from the lower grade stockpile, which resulted in a 28% lower head grade than last year.

The main takeaway is that I personally consider this first half of the year a non-recurring event, as the company now has a better plan of action for the next rain season in Brazil. Additionally, Beadell milled 1.977 million tonnes in H1 2014, which means that the plant is producing at an annualized rate of 3.95M tonnes per year, which is more than 10% higher than its nameplate capacity of 3.5M tpa. For the second half of this year, the company expects to produce 120,000-140,000 ounces of gold, which is almost twice (!) as much as in H1 of this year, at a cost of less than $500/oz.

Beadell remains one of my favorite - if not my absolute favorite - gold producers, and I have actually increased my position right before the numbers came out. The total guidance for this year remains unchanged at 180,000-200,000 ounces at an AISC of $805-855/oz. Using the current gold price, this means that Beadell will very likely generate in excess of $80M in free cash flow before taxes this year, and this should result in a net cash position before the end of this year.

Disclosure: The author is long BDREF.

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