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On Monday, Citi analyst Kate McCutcheon adjusted the price target for 29Metals Ltd (29M:AU) to AUD0.12, down from the previous target of AUD0.16, while maintaining a Sell rating on the stock. The revision follows the company’s first-quarter results, which showed a copper output of 4.1 kilotons, falling short of Citi’s estimates by approximately 20%. Zinc production, however, exceeded expectations with a reported 17 kilotons.
The Golden Grove operation of 29Metals faced challenges during the quarter, including seismic and ventilation issues that resulted in the deferral of 100 kilotons from the Xantho Extended area. This disruption led to an approximate $7 million cash loss for Golden Grove. The group’s overall cash position declined quarter over quarter by $86 million, landing at $166 million, although this figure included some one-time events.
Citi’s analysis anticipates a final $54 million insurance payout in the second quarter of the year, which is expected to help the company’s cash balance remain relatively stable, ending the quarter with a $1 million deficit. Despite this, the firm’s outlook for 29Metals is cautious, noting that the company’s leverage to base metals pricing could necessitate additional liquidity in the medium term.
The report also casts doubt on the potential for a restart at the Capricorn Copper project, given the ongoing drawdown of water and the lack of a clear path forward under 29Metals’ management. In light of the subdued expectations for copper prices and the company’s liquidity challenges, Citi has adjusted its valuation of 29Metals’ shares to 0.8 times net asset value (NAV), down from 1.0 times NAV, resulting in the lowered price target.
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