Hartleys Research: FY12 Production Target Exceeded

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FY2012 Production Target of 175Koz Exceeded
Focus Minerals Ltd (“Focus”, “Company”, “FML”) has exceeded its FY2012 production target of 175Koz gold (on a 100% production basis) with the delivery of 176.6Koz gold (156.5Koz gold attributable to FML) at cash operating costs (C1) of $1,222/oz. The Company generated unaudited total revenue of $283.6m for attributable Company revenue of $231.9m. Cash and bullion at the end of the June Quarter was $19.5m (down slightly on the previous quarter of $20.3m), and Focus has now drawn down $8m of a $10m Investec facility for working capital. Capital and exploration expenditure for the quarter totalled $26.1m (up from $15.3m), comprising $21.7m on mine capital development ($15m for waste movement at the Laverton Apollo pit) and $4.4m on exploration expenditure.

The Company continues to manage costs and recently launched an internal Value Enhancement Program aimed at identifying sustainable cost savings across the Group Operations. New initiatives include a new 3-year power contract at Coolgardie and a reduction in the contract digging fleet at Laverton, both of which are expected to reduce operating costs in the next few quarters. Focus is targeting total Group gold production of ~200Koz in FY2013.

Mining Costs Decreasing at Laverton
Campaign 11 (41 processing days) at Laverton produced 23.4Koz of gold (down from 25.6Koz of gold) for attributable gold of 19.1Koz at cash operating costs of $1,203/oz (up from $1,034/oz, restated after capital costs adjustment). The Company mined a total of 447Kt for ~29Koz from the Apollo, Fish and Lord Byron pits with FML targeting the mining rate of ~150Kt/month (for ~450Kt) in the September Quarter. The cost for mining is expected to decrease due to the completion of the waste removal, enabling 2 contractor diggers (of 4) to be demobilised. Pleasingly unit costs for mining for the month of June fell by some 26%. A 400Kt stockpile has been prepared for Campaign 12, which is scheduled for 44 days which started on the 9 July. September Quarter guidance is ~23Koz gold, with ~15Koz gold produced already from current campaign.

Strong Increase in Gold Mined at Coolgardie
Coolgardie produced 24.8Koz of gold (up from 21.8Koz of gold) at slightly lower cash costs of $1,189/oz ($1,231/oz March Quarter); exceeding guidance. With all development activities now completed at the Tindals underground, stoping will continue for the next two quarters, before the mine is handed over to FML’s technical team to work through the next phase of development. Ore from the Greenfields open pit will replace ore from the Tindals underground, with mining to commence in the September Quarter. Processing costs at Coolgardie have also improved (down $6/t), at similar recoveries of ~95%. September Quarter guidance is ~22Koz gold, with ~8Koz gold produced in the month July.

We continue to recommend FML as a Speculative Buy, with a Valuation of 6.7cps and 12-month Price Target of 7.5cps. Recent good-grade results from Burtville drilling also highlights that the Laverton district still providesexploration upside for shallow, potentially significant resource growth.

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