Ora Banda Mining Ltd (ASX: OBM) recently updated the market about a number of development programs it has on foot, prompting the analysts at Macquarie to take a closer look at the company.
Macquarie this week issued a new research report on Ora Banda, with a bullish price target which we'll get to shortly.
First, let's look at what the company announced.
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Looking to ramp up production
Ora Banda has an ongoing program called Drive to 300, which is an "aspirational" target for the company to double its gold production to 300,000 ounces per year over a three-year period.
This week the company signed off on three key developments to bring it closer to this aspiration.
The first was giving the go ahead for a new, three million tonne per year processing plant at the company's Davyhurst mine, at a cost of $375 million.
Those works are planned to start in early FY27, with commissioning scheduled for the third quarter of FY28.
Ora Banda added:
The Company intends that the existing Davyhurst plant will continue to operate during construction of the new plant and may continue to operate subsequently, depending on ore availability and economics.
The second project given the go-ahead was a third underground mine at the company's Waihi operations at a cost of $90 million, with the portal to be established in the second quarter of FY27, "with focus on fast-tracking development into the high-grade 'Golden Pole' lode''.
That project is expected to reach steady state production in the first quarter of FY28.
The company added:
Additionally, accessing Waihi underground provides Ora Banda with the opportunity to establish underground drill platforms, allowing for rapid, cost-effective extensional drilling similar to previous campaigns at Riverina and Sand King.
The company has also replaced its existing $50 million credit facility with a $200 million facility, giving it increased flexibility as it ramps up operations.
Ora Banda's Managing Director, Luke Creagh, said:
The Drive to 300 is the exciting next phase for Ora Banda, building on earlier success with the achievement of to Drive to 100 and Drive to 150. This doubling of production is currently expected to be capable of being internally funded and has the potential to add material value and position Ora Banda as a long-term sustainable gold business.
Shares looking like good value
The Macquarie team said Ora Banda's production outlook was higher than their expectations, due to their plan to keep the existing Davyhurst processing plant operating alongside the new one.
They said the company was "in a strong position to fund the new mill and underground using balance sheet and cashflow generation'', with total liquidity on hand of $432 million.
Macquarie said Ora Banda was "an attractive value proposition and the focus now moves to execution and delivery''.
They have a price target of $1.70 for the company, compared to its current price of $1.40.
Ora Banda is valued at $2.71 billion.
