CNMC Goldmine | Deep Dive

Updated: Aug 1

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Key Points

  • Strong execution and effective cost management has allowed CNMC to remain profitable since 2012

  • Spot gold is at its seven-year highs driven by a host of uncertainties such as the U.S. China trade war, a slowing global economy and the COVID-19 pandemic

  • We believe that the prolonged low interest rate environment, economic uncertainty, as well as geopolitical tensions between the U.S. and China will continue to drive safe-haven demand for precious metals like gold

  • While CNMC has been left behind in the 2020 gold miners rally due to a spate of unfortunate events such as the Malaysian Movement Control Order, we believe that the worst is over. As such, we expect gold production in 4Q2020 to be boosted by the commencement of underground mining and higher heap leach recovery rates

  • CNMC’s strong cash position, low liabilities and superior liquidity ratios will allow it to tide through its misfortunes

  • We expect CNMC’s margins to be boosted by lower oil prices, a key mining consumable contributing an estimated 15-20% of CNMC’s all-in sustaining costs

  • CNMC has significant exploration upside supported by its strong track record of active exploration and its Kelgold and Pulai projects hold promising potential

  • Applying a WACC of 12.11% and an EV/EBITDA exit multiple of 4.0x, we arrived at an estimated fair value of SGD0.33 using the Exit Multiple Method, representing an upside of 59.3%. Our fair value is also supported by the Gordon Growth Method, which yielded a fair value per share of SGD0.33

Company Overview

CNMC Goldmine Holdings Limited (CNMC) together with its subsidiaries are principally engaged in the business of exploration, mining of gold and the processing of mined ore into gold dores. The Group commenced operations in 2007 and is the first Catalist-listed gold producer on SGX-ST. The group currently has 3 projects in the State of Kelantan, Malaysia.

The Sokor Project, which achieved its first gold pour in 2010, is the group’s flagship project covering an area of 10sqkm with 5 identified gold deposits. As of 31 December 2019, estimated total gold resources at Sokor are 16.32 Mt at 1.7 g/t gold grade, which translates into 900,000oz of contained gold. In 2017, the group had also completed the acquisition of a 100% stake in Kelgold Mining Sdn. Bhd., which owns a 15.5sqkm greenfield project that can potentially increase the group’s gold production, as well as a 51% stake in Pulai Mining Sdn. Bhd., which owns a 38.4sqkm brownfield project that can potentially yield gold, iron ore and feldspar.

CNMC uses a combination of heap and vat leaching and CIL processing to process ore that has been mined.

Key Milestones since IPO


  • 28 October: CNMC’s shares commenced trading on Catalist, with placement of 41,100,000 placement shares (23,900,000 new shares and 17,200,000 vendor shares) at SGD0.40 each


  • 30 December: Commissioned 70kt Heap Leach Facility at Sokor

  • First-year of net profitability since the commencement of exploration operation in 2007


  • 3 January: Heap leach operation enters production and achieves first gold pour

  • 20 September: Commencement of production at CNMC’s second leach yard

  • 18 November: Commissioning of second gold de-absorption plant, tripling total de-absorption capacity. The Group will be able to handle the gold loaded carbon generated from the Group’s estimated heap leaching capacity of 1Mt of ores when the third leaching pad, which is currently under construction, starts operation


  • 20 May: Commencement of production at CNMC’s third leach yard with leaching capacity of up to 600kt, bringing combined leaching capacity to 1Mt


  • Produced record 31koz of gold in FY2015 up 19% year-on-year


  • 23 August: Approval of application for large scale operation status for Sokor. CNMC is now allowed to mine unlimited amounts of ore at Sokor

  • 22 September: Output at Sokor exceeds 100koz, surpassing initial ore reserves estimate

  • Restarted a vat leach facility at Sokor that increased the group’s leaching capacity by approximately 200kt of ore. The Group’s total estimated processing capacity increased to 1.2Mt


  • 20 January: Mining lease extended to 31 December 2034

  • 24 February: Completion of subscription of new shares representing 51% of the enlarged share capital of Pulai Mining Sdn. Bhd

  • 16 May: Completion of the acquisition of the entire issued share capital of Kelgold Mining Sdn. Bhd.

  • 6 November: CIL plant began trial operation. The CIL plant has the capacity to process 500t of ore daily


  • 2 May: Official opening of CIL plant

  • Completed construction of the first of two new heap leach pads in FY2018 to replace three older ones

  • Sokor achieves highest monthly gold production record of 5,892.32oz in August


  • Second new permanent heap leach pad which will be ready by 4Q2019, will bring heap leaching capacity to 6Mt from 2.8 Mt


  • Expected completion of flotation facility

Over the years, the group has managed to grow its overall ore processing capacity by over a hundred times from just 60kt in 2011 to 6,255kt in 2019. Active exploration over the years has also increased gold resources three-fold from 327,700oz in 2011 to 900,000oz in 2019.

The group’s gold production volume has been largely stable since FY2014, with the exception of FY2017, averaging 28.9koz per annum. In FY2014, the group recorded a 106.5% year-on-year increase in gold production as the completion of a third leach yard and full-scale operation of the Group’s second gold de-absorption plant tripled the group’s processing capacity. However, gold production fell significantly in FY2017 due to low ore grades. Construction of the CIL plant which processes higher-grade ore was delayed till 2Q2017 and could not contribute to the Group’s production in time in FY2017. Subsequently, the official commencement of the CIL plant in FY2018 boosted the Group’s gold production to an all-time high in FY2018. FY2019 saw a 10.6% decline in gold production from 2018 as weak rock masses and water underground in 3Q2019 forced the group to push back the schedule for underground mining, affecting overall production.

Strong execution and effective cost management have allowed CNMC to be profitable each year since FY2012. The group’s revenue has been largely driven by gold production volumes with the exception of FY2013. In FY2013, even though gold production increased by almost two-fold, a 20.4% decline in average realised gold price per pound from USD1,651 to USD1,314 caused revenue growth to be flat. In FY2014, the group was able to achieve a 346.2% surge in net profit due to economies of scale as well as a five-year income tax exemption. The surge in gold production that year allowed the group to improve its all-in-costs per ounce to USD725 from USD1,073 in FY2013. However, net profits fell back down in FY2017 due to lower production volumes as well as costs for the construction of the new CIL plant and increase in royalty fees from 5% to 10% of revenue. Profits remained low in FY2018 mainly due to expenses incurred for the Proposed Dual Listing on Stock Exchange of Hong Kong and the grant of performance shares to deserving employees. Subsequently, higher capital expenditure for non-sustaining operations resulting from the construction of the underground mining facility and expansion of production infrastructure in FY2019 continued to place pressure on net profits.