Pantoro (PNR) pre-released its June Q report with production of 9.6koz (-15% vs March Q of 11.3koz vs Argonaut 15koz) and full year FY19 production of 43koz. Production was impacted by a slower than expected pre-strip of the Wagtail South open pit, a 6-day mill shutdown which was announced in April, and lower underground loader availability at Nicolsons. The setbacks themselves are minor but the effect has been exacerbated as it has occurred at both main production areas combined with a planned mill shutdown. Today’s news is disappointing and highlights the risk of single mine asset producers. We see cash burn of (~$3m) in the June Q as a result of the lower production and higher costs. Despite the setback, and our downward revisions, the stock trades on 3.5x FY20 EV/EBITDA and 9x FY20 P/E which is cheap vs its peer group. We see value in the stock; however, investors will be looking for more reliable and predictable production before we see a re-rate. BUY recommendation maintained and TP $0.30ps (prior $0.39).
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