Thursday, November 10, 2016

Richmont Mines - Those Reading This Blog Knew That

Today Richmont Mines released its 3Q 2016 report. The results were, more or less, in line with my expectations. They were to be worse and...they were worse. I remind my readers that in my previous articles I noted that the second half of 2016 was going to be worse (for example, this article).

However, it looks like somebody does not read this blog and today Richmont shares dived 16%:

It looks like a catastrophe but the entire precious metals market (excluding silver) today looks like a disaster. However, there is no disaster at Richmont.

The company is very busy with going deeper at its flagship property, Island Gold. As a result, Island Gold goes not so fast as before. For example, in 3Q 2016 the Island Gold mill processed only 58.8T tons of ore, while in 2Q and 1Q 2016 it was milling 79.9T and 75.9T tons of ore, respectively.

Lower throughput = higher costs. Add to that the increased exploration (Island Gold) and you have relatively high costs: 

As a result the company became unprofitable in 3Q 2016.

What next? The management is confident that the guidance for 2016 is going to be met so 4Q 2016 should be much better than 3Q. But remember, 2H 2016 will be poor.  

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