OBM’s 1HFY25 earnings result was better than we had expected, although the beat was due to non-cash inventory and exploration expense variances. Cash had been previously reported hence the cash flow result was broadly in line. Mining rates at Riverina have stabilised over the past six months and we expect to see improved head grades in the 2HFY25, with group production also boosted by the ramp up of Sand King. Our base case already captures +150% of ounces in resource for Riverina and +115% of ounces in resource for Sand King and we reiterate our HOLD rating and A$1.00 price target on OBM. Regional exploration success has the potential to deliver material upside to our base case in the medium to long-term, and OBM has lifted its exploration spend to A$40m. However, we do not expect regional exploration to deliver material ounces to the resource base in the next 12-18 months. The new discovery at Little Gem, 2.5km from Riverina is an early positive indication of the regional exploration potential.
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