Good morning,

See below SP Angel's commentary  on AIM quoted Goldplat - the Company's house broker maintain its 20p BUY price target (current sp 8.25p - 142% increase) following Goldplat's Preliminary Results announced this morning.

The market leading gold recovery company in Africa reported gross profits of ?5.3m generated from the recovery of 35,000oz of gold from its operations in South Africa and Ghana. Operating profits totalled 2.64m and a PBT of 207,000, which included a write down of the company's Kilimapesa gold mine in Kenya of ?2..373m (mine placed on care and maintenance until a time when project economics can justify the reopening of the mine). Goldplat's net cash position totals ?2.36m and a dividend of 0.12p has been proposed.

During the period, the Company undertook a strategic review to refocus Goldplat's business model to concentrate on the growth of its core profitable gold recovery businesses. To note, Goldplat's South African gold recovery plant sold a further 11% stake (in line with SA's BEE policy) to BEE Partner Amabubesi during FY 2013 for approximately ?2.1 million, giving a current see-through value for the 85% of GPL Goldplat owns of circa ?16 million. In line with re-focusing its business strategy, Goldplat has strengthened management team and appointed Hansie van Vreden, a qualified Metallurgist, as Managing Director of  South African and Ghanaian gold recovery operations; and has implemented plans to further improve processing and profitability of both of its gold recovery operations to maintain position as a profitable, dividend paying, debt free gold company. 

Best

Felicity

S.P. Angel - Goldplat - Flash Note - 6 November 2013

Golplat (GDP LN) 7.75 pence, Mkt Cap ?13m - Preliminary Results FY 2013

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Buy - Target Price 20 pence

• Recovery Operations: Gross profits at the Gold Recovery Operations of ?5,308,892 with South Africa generating strong gross profits of ?3.23m.
• Profits at the GRG (Ghana Recovery Operations) performing in line with expectations at ?2.08m following warning of challenges facing GRG.
• Kilimapesa: Losses at Kilimapesa were worse than expected widening to ?988,000 against ?750,000 built into our expectations.
• Group Operating Profit of ?2.64m down 42% from ?4.53m last year reflects losses from Kilimapesa and higher than expected G&A charges,
• The swing in profits at Kilimapesa accounted for 68% of fall in profits ((?983 k of losses this year and ?319 of profits last year) and the balance is mainly (20%) a result of higher G&A cost which went up from ?1.52m to ?1.927m.
• The write down at Kilimapesa at ?2,373m results in pre-tax profits including exceptionals of ?207.000.
• To fulfil SA BEE requirements, the SA Gold Recovery sold a further 11% to their BEE partners for ?19m giving a profit on the sale of ?1.657m.
• The see through value on this sale puts a value on the recovery operations in South Africa on its own of ?16m.
• Cash at the end of the period stood at ?2.36m (2012 ?4.57m).
• The company has declared a dividend of 0.12 pence putting it on a yield of 1.5%.
• Hansie van Vreden, a qualified metallurgist has been appointed Managing Director of the South African operations.

 Gold Recovery Operations In line with expectations

 The underlying gold recovery operations performed well despite the previously highlighted pressures on the recovery business in Ghana. Gross profits at the recovery operations were in line with our expectations. Overall gross profit margins at the recovery operations were 19% down from 22% at which operations had been running.

 Goldplat's recovery operations in South Africa (GPL) outperformed expectations with gross profits of ?3.23m absorbing some of the weakness in the operations in Ghana.

• In South Africa initiatives such as tailings re- treatment and processing of high grade wood chips have been successfully implemented on time and on budget.
• The CIL plant commissioned in March has 5 years of tailings to process and the second rotary kiln installed in July this year has the capacity to treat to the substantial wood chip stockpile as well as bring flexibility to the processing capacity.
• New supply contracts have been put into place with major South African producers with a focus on high margin fine carbon processing.
• The initiative to process high grade ore at the Central Rand Gold's Crowne East Shaft has started - the main reef resource being targeted has been exposed but effective mining of this is still being investigated.
• The company are targeting 200 t a month at 15 g/t gold at this project.

 Gold Recovery Ghana (GRG) has performed in line with downgraded expectations-  operations suffered from the high cost of material and produced gross profits of ?2.08m.

• The toll treatment plant at Endeavour (56% of GRG's revenues) performed well with additional material sourced close to the Nzema plant to reduce transport costs.
• CIL plant at Tema (31% of Group Revenues) which processes artisanal tailings has been under pressure as a result of the high cost of securing material and the related transport costs.
• This operation was temporarily stopped has restarted to treat stockpiled tailings.
• Initiatives have been taken to buy legal sources of material at economic prices - an initiative being supported by the government which is acting to curtail unlawful trading activities.
• The incinerator section (13% of revenues) which treats high value carbon has performed well.
• To improve the processing of the fine carbon section, an additional spiral circuit is planned with a new rotary kiln (already purchased) to be installed.

Expansion to a third site at Burkina Faso is still being targeted.

An environmental study was re-commissioned at the site following the decision to target high grade fine carbon and mill liners from major gold producers instead of artisanal tailings.

The Environmental study was completed in August 2013 with licence approval expected by the end of 2013.

Kilimapesa losses widened to ?983,000 for the full year which were worse than our expectations at ?750,000. The mine remains on care and maintenance.

The write down at Kilimapesa of ?2.373m has resulted in a pre-tax profit at the group of ?207,000.

The business remains cash generative and is under rated

The operations have the capacity to throw up cash flow to follow a self funded growth path in the recovery operations.

Expansionary capex amounted to around ?2.2m with capex of ?1.33m was invested in plant in the recovery operations - a number of these projects such as the CIL plant and rotary kiln form the basis for growth in the South African business.

The company paid ?1m out in dividends for FY 2013 and a small dividend is to be paid in FY 2014 which underscores confidence in the cash flow of the business. Cash at the end of the year stood at ?2.36m (?4.57m in FY 2012).

We reduce our forecasts for 2014 by 10% which is based on relatively flat outlook for the gold recovery operations and a halt in losses at Kilimapesa. This is based on a muted outlook for the gold price and the sector. The first half of the FY 2014 is said to be challenging with an improvement expected in the second half.

The share price remains under rated based on a prospective PE of 5.1x with scope for dividends to grow next year - we forecast a dividend of 0.3 pence putting the stock on a yield of 3.4%. 

Analysts

John Meyer - 0203 470 0470

Carole Ferguson - 0203 470 0473

Sergey Raevskiy - 0203 470 0474

Sales

Richard Parlons - 0203 470 0472

Jody Downes - 0203 470 0471

SP Angel

Prince Frederick House

35-39 Maddox Street

London

W1S 2PP

⁺SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.