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VSA Capital Market Movers – NQ Minerals

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VSA Morning Miner, 13/01/21


NQ Minerals (NXX:NQMI)


NQ Minerals (NXX:NQMI) has reported strong production results for the final quarter of 2020 with zinc concentrate production of 5.6kt which was up 14% YoY and 22% QoQ while lead concentrate production was up 17% YoY although down 19% QoQ. This meant full year production of 38.3kt of lead concentrate and 19kt of zinc concentrate up 53% and 22% YoY respectively. Lead concentrate was in line with our forecast of 38.8kt although zinc was short of the 20.5kt target we had set. That said, our forecasts highlighted an ambitious target and it is impressive that the company has broadly achieved these aims which will have a substantial positive impact on earnings performance. Furthermore, we expect growth to continue into 2021 supported by zinc and lead pricing, with the former up 21% through 2020 starting the year over US$2,750/t.

We also highlight full year gold production of 5,452oz which was 9% ahead of our forecast while silver production of 1.1mnoz was again ahead of our forecast of 0.9mnoz. Given the increase in precious metals prices this extra output will provide valuable support to NQMI’s earnings performance. Following the restructuring of the company’s balance sheet operational performance will now be reflected in earnings performance and we expect Hellyer to continue to perform strongly in 2021 with further substantial increases in output given that H1 2020 was still in the ramp up phase.

NQMI has reported the start of construction of a new tailings dam at Hellyer which will provide additional capacity as the current dam is emptied for processing through the mill. The original tailings facility will then provide capacity to extend the mine life beyond 2028 with NQMI now targeting a reopening of the underground operation at Hellyer where significant exploration upside potential remains. The total cost of A$30m was reflected in our model although at a later date; this is likely a benefit of the successful debt deal negotiated in late 2020 which now provides the company with flexibility to develop its asset base.

With this in mind, NQMI highlights that with Hellyer running performing strongly management’s focus can now turn to the restart of the high grade Beaconsfield gold mine. Currently metallurgical testing is underway to enable flowsheet optimisation along with engineering studies to finalise start up costs and plant refurbishment requirements.

We reiterate our Buy recommendation and 20p target price.




Oliver O’Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: [email protected]

Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: [email protected]


VSA Capital Research | T: +44 (0)20 3005 5000 | E: [email protected]


VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com


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