Manuka Resources starts gold production. Can Varta and K+S manage the turnaround?

Manuka Resources - Start of gold production is set

Manuka Resources is an Australian mining and exploration company focused on the Cobar Basin in central western New South Wales. The Company has two fully permitted mining projects, one gold and one silver. The Wonawinta Silver Project has an estimated mineral resource of 51 million ounces, making Manuka one of Australia's largest silver producers. Not only silver, but also gold and lead occur on the property, which is also home to the Company's processing plant. The Mt Boppy gold project is home to an old gold mine. The open pit contains resources of approximately 280,000 tonnes grading 4.95 g/t gold.

On March 22, the Company announced plans to resume production at Mt Boppy in the June quarter. The target is approximately 25,000 ounces of gold per year for the next 3 years. Bulk sampling of the waste dumps to assess gold grade has been initiated. It is showing positive results in metallurgical tests, allowing cyanidation to take place at the Wonawinta plant starting in April. To increase the mine life, the Company has planned further exploration to develop additional open pit deposits. The Mt Boppy open pit mine is scheduled to restart later in the year, and drilling at Mt Boppy Deeps in H2 is expected to show whether an underground mine is viable. In addition, 3-4,000 ounces of gold are to be recovered from crushed ore at the pit bottom.

As a result, the focus is now on the gold project for the time being, which has significantly better economic viability given the current gold-silver price ratio. It is an important step as it enables the Company to move forward with its Taranaki Green VTM project off the coast of New Zealand under its own steam. The project contains 3.2 billion tons of iron sand, vanadium and titanium, according to a JORC-compliant study. Vanadium, in particular, could play a crucial role in the energy transition, as it is needed for vanadium redox batteries. With the announcement, the share price in Australia immediately shot up by almost 30% and is trading at AUD 0.067. This should mark the start of the turnaround.

Varta - EUR 51 million fresh capital

Varta shareholders had a tough year in 2022. First came a profit warning, then the forecasts were withdrawn entirely, and the management could not give a new forecast. With the V4Drive cell, the Company wanted to enter the field of electromobility, but the high expectations could not be met. It has become quiet around the future growth driver that is still working together with Porsche. The order situation was so bad recently that the Company had to put all employees at its plant in Nördlingen on short-time work.

Now the battery company has secured fresh capital of almost EUR 51 million from its major shareholder Michael Tojner through a capital increase. The shares were issued at a price of EUR 22.85 each and are fully entitled to dividends for 2022. This is intended to implement the restructuring plan, which envisages savings in procurement, internal processes and personnel, investments in growth areas and an expansion of the customer base. The goal is to increase profitability in the lithium-ion button cell and household battery businesses and get the group back on track.

Analysts remain skeptical, as the group has high debts and due to the sharp increase in costs, margins in the highly competitive rechargeable lithium-ion button cell sector are slim. The measures can only be a first step toward stabilizing the Company financially. As of May 1, Thomas Obendrauf is the new CFO. He is considered a specialist in cost reduction and efficiency improvement. The capital measure caused the share price to plummet to EUR 23.60. Currently, one share certificate costs EUR 24.20.

K+S - A record year

Last week, K+S presented its annual figures for 2022. In the process, the Company recorded strong growth in revenues, EBITDA and free cash flow. Revenues rose 77% to EUR 5.7 billion, and EBITDA more than doubled YOY from EUR 1.1 billion to EUR 2.4 billion. It was a record year for the Kassel-based company. Higher prices in the agriculture customer segment and industrial products containing potash more than compensated for lower sales volumes and higher costs.

The Group reported that it had succeeded in avoiding energy costs in the mid three-digit million euro range by concluding long-term gas supply contracts at an early stage. In the Agriculture customer segment, sales increased significantly from EUR 2.3 billion to EUR 4.5 billion despite lower sales volumes. In the Industry customer segment, prices rose for both potash and salt products. With the record revenues, the Group was able to repay its financial debt in full.

The outlook for the current fiscal year, however, is subdued. This will not be another record year, as price levels will fall slightly and costs will rise. Accordingly, EBITDA is expected to be between EUR 1.3 billion and EUR 1.5 billion. Following the figures, 5 analyst houses issued a 'buy' recommendation and 2 recommended 'hold'. The price targets are between EUR 20 and EUR 29 and thus above the current price level of EUR 19.51. This year's dividend is EUR 1.00 and corresponds to a dividend yield of around 5%. In addition, the Group intends to buy back shares worth EUR 200 million.

Manuka Resources has secured its future with the new start of gold production. In addition to the silver project, this will also allow the vanadium project to be kicked off, which has enormous potential. The share has already jumped. At Varta, on the other hand, things do not look so rosy as yet. The Company is financially secure for now, but the restructuring program must take effect. K+S can look back on its best year ever. The debts have been paid off, and good money is being earned again this year, even if not as much as last year. The share has catch-up potential.