MML – Citi rates the stock as Neutral

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Medusa Mining expects improved production and exploration upside in FY19 after commissioning the E15 server shaft at Co-O gold mine. Nevertheless, until there are some benefits to be observed from the development Citi maintains a Neutral/ High-Risk rating.

The new shaft will be used to move workers and materials and the older one will be dedicated to ore haulage. This should improve efficiency.

Citi includes an increase in gold output related to the new shaft in its base case but takes a more conservative view of utilisation rates. Target is reduced to $0.38 from $0.56. The relatively short reserve life remains a risk.

Sector: Materials.

Target price is $0.38.Current Price is $0.32. Difference: $0.06 – (brackets indicate current price is over target). If MML meets the Citi target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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