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Why the Blackham Resources Ltd share price rocketed 30% higher today

One of the best performers on the market this morning has been the Blackham Resources Ltd (ASX: BLK) share price.

At the time of writing its shares are up a massive 30% to 6.9 cents.

What happened?

This morning the gold miner released an operational update on its production at its Matilda-Wiluna Gold operation during the month of February.

According to the release, Blackham achieved record monthly gold production of 6,713 ounces during February. This topped the previous record production it posted in January of 6,498 ounces.

The driver of this was access to high grade zones in its M4 and Galaxy pits which the miner achieved during the December quarter. This also allowed for lower strip ratios and ultimately a record low all-in sustaining cost (AISC) of A$912 per ounce in February.

As a comparison, during the month the average realised gold price was A$1,670 per ounce, meaning the miner is enjoying extremely high margins.

This is no doubt a big positive for shareholders. In November Blackham was operating with an AISC of A$2,247 per ounce, meaning it was effectively losing money every time it pulled gold out of the ground.

As a result of this strong start to the year, management has forecast a second-half AISC of between A$1,100 and A$1,200 per ounce.

Should you invest?

Whilst I am bearish on the gold price in the long-term due to the prospect of rising rates in the United States, if Blackham can achieve its AISC guidance then I have little doubt it will remain profitable even if the gold price weakens.

Considering its share price has been thoroughly beaten down over the last 12 months amid concerns over its rising costs, this could make it worth taking a closer look at ahead of larger rivals Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) which I think are potentially overvalued.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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