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AFT Pharmaceuticals — On the cusp

AFT Pharmaceuticals (NZX: AFT)

Last close As at 21/12/2024

NZD2.80

— 0.00 (0.00%)

Market capitalisation

NZD294m

More on this equity

Research: Healthcare

AFT Pharmaceuticals — On the cusp

AFT Pharma recently reported its FY17 results. Operating revenue grew 8.1% compared to FY16, mainly due to 19% growth in the Australian market, which currently comprises 53% of company revenue. New Zealand was weak due to Metoprolol issues and weak pharmacy demand. Maxigesic continues to do well internationally and is now launched in eight countries. Additionally, a licence agreement was recently announced in France, the world’s second largest market for similar products.

Analyst avatar placeholder

Written by

Healthcare

AFT Pharmaceuticals

On the cusp

Financial update

Pharma & biotech

31 May 2017

Price

NZ$2.30

Market cap

NZ$223m

NZ$0.68/US$

Net debt (NZ$m) at March 2017

7.45

Shares in issue

97.1m

Free float

24.3%

Code

AFT

Primary exchange

NZX

Secondary exchange

ASX

Share price performance

%

1m

3m

12m

Abs

(6.3)

(19.1)

(23.3)

Rel (local)

(6.6)

(20.7)

(24.4)

52-week high/low

NZ$3.22

NZ$2.25

Business description

AFT Pharmaceuticals is a specialty pharmaceutical company that operates primarily in Australasia but has product distribution agreements across the globe. The company’s product portfolio includes prescription and over-the-counter drugs to treat a range of conditions and a proprietary nebuliser.

Next events

Maxigesic launches

2017

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

AFT Pharmaceuticals is a research client of Edison Investment Research Limited

AFT Pharma recently reported its FY17 results. Operating revenue grew 8.1% compared to FY16, mainly due to 19% growth in the Australian market, which currently comprises 53% of company revenue. New Zealand was weak due to Metoprolol issues and weak pharmacy demand. Maxigesic continues to do well internationally and is now launched in eight countries. Additionally, a licence agreement was recently announced in France, the world’s second largest market for similar products.

Year end

Revenue (NZ$m)

PBT*
(NZ$m)

EPS*
(NZ$)

DPS
(NZ$)

P/E
(x)

Yield
(%)

03/16

64.0

(10.8)

(0.11)

0.0

N/A

N/A

03/17

69.2

(18.5)

(0.19)

0.0

N/A

N/A

03/18e

97.7

(0.6)

(0.01)

0.0

N/A

N/A

03/19e

124.2

14.7

0.15

0.0

15.3

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Australian market leads the way

Revenue in Australia was up 19% in FY17 compared to FY16, thanks in large part to Maxigesic sales doubling as well as successful launches of Crystaderm and Restoranail. Growth is expected to continue to be robust as patients switch from codeine containing products (which will no longer be available over the counter after 1 February 2018 due to re-scheduling) to Maxigesic.

Maxigesic marketing expanding globally

Maxigesic is currently sold and launched in eight countries and distribution agreements are in place in a total of 112, including a recent licence deal in France, which has a US$900m market for paracetamol/acetaminophen and ibuprofen tablets (the second largest in the world, behind the US). AFT is targeting between 30-40 launches for Maxigesic in FY18.

R&D programmes progressing

The FDA has accepted the application for registration for the oral version of Maxigesic and a decision is pending (likely in CY18). AFT is currently completing a 275-patient pivotal study for Maxigesic IV (filing expected in CY17) and recently completed a 200-patient study for Maxigesic Oral Liquid. A 275-patient pivotal study of Maxiclear PE is expected to complete this calendar year as well. NasoSURF is now in distribution and human factor studies with pharmacokinetic and clinical studies are expected to begin in FY18.

Valuation: NZ$461m or NZ$4.75 per share

We are adjusting our valuation from NZ$461m or NZ$4.76 per share to NZ$461m or NZ$4.75 per share. We have reduced our FY18 and FY19 revenue projections by NZ$1.4m and NZ$2.0m, respectively, but the effect of this reduction is offset by advancing our NPVs to the most recent period. We expect to update our valuation following additional information regarding the status of Maxigesic launches as well as results of clinical trials.

Making progress

AFT Pharmaceuticals is a specialty pharmaceutical company with over 130 prescription, over the counter and hospital products across an array of indications. In recent years, it has been involved in the international launch of a series of products outside of its home territory in New Zealand. It has successfully built a commercial infrastructure in Australia where the market for its products continues to grow. It is currently in the early stages of a launch across South-East Asia, and has recently signed multiple out-licensing partners across Europe and the Middle East. The company’s lead product is Maxigesic, a co-formulation of acetaminophen and ibuprofen at a specific ratio (3.3 to 1) that has been clinically proven to increase potency. AFT is using Maxigesic as its flagship product for international expansion and it currently accounts for the majority of overseas revenue.

Australian revenue growth a highlight of FY17 results

AFT recently reported operating revenue of NZ$69.2m for FY17, ending on 31 March 2017. This marks an 8.1% increase over FY16. The loss for the period was NZ$18.3m, compared to an FY16 loss of NZ$13.3m.

Exhibit 1: FY17 results by segment

NZ$000s

Revenues (2017)

Revenues (2016)

Loss before tax (2017)

Loss before tax (2016)

Australia

37,064

31,224

(3,663)

(3,233)

New Zealand

29,168

31,135

(5,782)

(4,902)

Asia

1,005

648

(689)

(1,015)

Rest of World

1,968

1,007

(8,226)

(4,159)

Total

69,205

64,014

(18,330)

(13,309)

Source: AFT Pharmaceuticals

The Australian segment reported particularly strong results, thanks to Maxigesic revenues more than doubling (due to less stringent scheduling for Maxigesic as well as the announcement that products containing codeine would no longer be available without a prescription) and the launch of Crystaderm and Restoranail. The outlook for Maxigesic in Australia remains strong, as market research conducted by the company suggests that 40-47% of current consumers who buy 750 million OTC codeine analgesics each year in Australia would switch to another OTC analgesic rather than get a doctor’s prescription, which they will be forced to do as of 1 February 2018.

Maxigesic momentum

Maxigesic is now sold and launched in a total of eight countries – Australia, New Zealand, Brunei, Italy, Serbia, Singapore, United Arab Emirates and the United Kingdom – with total tablet sales more than tripling from 22m to 74m. In total there are licence agreements in 112 countries. AFT is targeting one-third of these areas to have launches in FY18, one-quarter in FY19, another one-quarter in FY20 and the rest in FY21. If AFT executes on this plan successfully, Maxigesic could be available in over 40 countries by the end of the fiscal year, including much of Europe. The major rate-limiting step will be the ability of the company to successfully traverse the registration applications in all of these different countries in a timeline manner.

Exhibit 2: Current and upcoming Maxigesic launches outside Australia/New Zealand

Country

Status

Spain

Launch pending

Portugal

Launch pending

UK

Launched, sales ahead of expectations

Belgium

Launch pending

Luxembourg

Launch pending

France

Launch pending

Nordics

Launch pending

Eastern Europe & Balkans

Launch pending

Serbia

Launched

Italy

Launched, sales increased sixfold

Kuwait & Iraq

Launch pending

United Arab Emirates

Launched, sales tripled

Singapore/Brunei

Launched, reason for 55% growth in South-East Asia Revenue

Malaysia

Launch pending

Country

Spain

Portugal

UK

Belgium

Luxembourg

France

Nordics

Eastern Europe & Balkans

Serbia

Italy

Kuwait & Iraq

United Arab Emirates

Singapore/Brunei

Malaysia

Status

Launch pending

Launch pending

Launched, sales ahead of expectations

Launch pending

Launch pending

Launch pending

Launch pending

Launch pending

Launched

Launched, sales increased sixfold

Launch pending

Launched, sales tripled

Launched, reason for 55% growth in South-East Asia Revenue

Launch pending

Source: AFT Pharmaceuticals

New Zealand still a work in progress

New Zealand continues to be a bit of a problem area, falling 6.3% in FY17. Approximately half of the decline (~NZ$1m) was due to ongoing issues with Metoprolol, which AFT had been sole supplier of for the New Zealand market. As a reminder, Metoprolol is a beta blocker used to treat angina, high blood pressure and heart failure. Since November 2015, there has been an ongoing global shortage of the active ingredient, metoprolol succinate, due to a manufacturing issue. The New Zealand government pharmaceutical buying agency, PHARMAC, and AFT have agreed that AFT will no longer supply Metoprolol to the New Zealand market from approximately mid-FY18 onwards as PHARMAC has enlisted other sources. We believe the total additional downside from this lost contract will be between NZ$1m and NZ$2m.

The other half of the New Zealand decline was due to weakness in the Pharmacy channel, especially in the first half of the year. The reason for the weakness is difficult to discern but may be due to a mild cold/flu season in the winter months and then a disappointing allergy season due to wet weather in the spring.

Spending driven by increased investment

The company reported R&D expenses increased 38.7% to NZ$11.2m as the company has ramped up its development programmes. AFT is currently completing a 275-patient pivotal study for Maxigesic IV (filing expected in CY17) and recently completed a 200-patient study for Maxigesic Oral Liquid. A 275-patient pivotal study of Maxiclear PE is expected to complete this calendar year as well.

NasoSURF completed Class I Medical Device registration in the US and is now in distribution and human factor studies with pharmacokinetic and clinical studies (including a 300-patient trial in its first indication) expected to begin in FY18. AFT is also preparing to file an IND with the FDA this year.

Selling and distribution expenses increased 32.2% to NZ$26.0m, thanks primarily to the launch of OTC products in Australia and Singapore as well as the cost of advertising of Maxigesic following its rescheduling on 1 July 2016 in Australia.


Valuation

We are adjusting our valuation from NZ$461m or NZ$4.76 per share to NZ$461m or NZ$4.75 per share. We have reduced our FY18 and FY19 revenue projections by NZ$1.4m and NZ$2.0m, respectively, (mainly due lower expectations in the New Zealand market) but the effect of this reduction is offset by advancing our NPVs to the most recent period. We have also eliminated the tax liability for 2019 and part of 2020 due to carried forward tax losses. We expect to update our valuation following additional information regarding the status of Maxigesic launches as well as results of clinical trials.

Exhibit 3: DCF sensitivity table (NZ$/share)

Terminal EBIT Margin

Terminal Revenue Growth

15%

25%

34%

38%

42%

-2%

2.36

3.05

3.67

3.95

4.23

-1%

2.43

3.19

3.87

4.17

4.47

0%

2.53

3.36

4.10

4.44

4.77

1%

2.64

3.56

4.39

4.76

5.13

2%

2.78

3.82

4.75

5.16

5.58

3%

2.96

4.14

5.21

5.68

6.16

4%

3.20

4.58

5.82

6.38

6.93

5%

3.54

5.19

6.68

7.34

8.01

Source: Edison Investment Research

Financials

AFT reported NZ$16.0m in cash as of 31 March 2017, down from NZ$28.1m a year ago. It raised NZ$9.1m in March 2017 with the issue of redeemable preference shares to two major shareholders. The company is currently in the midst of a share purchase plan being offered to a broader group of eligible shareholders, which is looking to raise up to NZ$1.25m. The offer opened on 24 May 2017 and closes on 12 June 2017.

We expect that AFT will have sufficient capital to reach profitability, which it guides to the FY18/19 timeframe (we are currently expecting a break-even FY18 and a profitable FY19). It is important to note that our estimates for profitability are heavily dependent upon growth in the Maxigesic franchise, especially in the ROW segment. Whether or not AFT is able to meet or beat these estimates will depend on whether the company is able to execute on the estimated 30-40 launches it is targeting in FY18.

Exhibit 4: Financial summary

NZ$000

2015

2016

2017

2018e

2019e

March

NZ GAAP

NZ GAAP

NZ GAAP

NZ GAAP

NZ GAAP

PROFIT & LOSS

Revenue

 

 

56,241

64,014

69,205

97,731

124,214

Cost of Sales

(35,083)

(40,435)

(43,207)

(49,383)

(56,779)

Gross Profit

21,158

23,579

25,998

48,348

67,435

EBITDA

 

 

(9,659)

(7,821)

(15,125)

1,260

16,519

Operating Profit (before amort. and except.)

(9,530)

(7,667)

(14,982)

1,403

16,662

Intangible Amortisation

99

114

183

183

183

Exceptionals

0

0

0

0

0

Other

(546)

(618)

2,245

2,357

2,475

Operating Profit

(9,977)

(8,171)

(12,554)

3,943

19,320

Net Interest

(1,908)

(3,145)

(3,531)

(2,000)

(2,000)

Profit Before Tax (norm)

 

 

(11,438)

(10,812)

(18,513)

(597)

14,662

Profit Before Tax (reported)

 

 

(11,885)

(11,316)

(16,085)

1,943

17,320

Tax

282

42

(58)

0

0

Profit After Tax (norm)

(11,156)

(10,770)

(18,571)

(597)

14,662

Profit After Tax (reported)

(11,603)

(11,274)

(16,143)

1,943

17,320

Average Number of Shares Outstanding (m)

1.2

96.8

97.1

97.1

97.1

EPS - normalised (NZ$)

 

 

(9.46)

(0.11)

(0.19)

(0.01)

0.15

EPS - normalised fully diluted (c)

 

 

(945.74)

(11.12)

(19.12)

(0.61)

15.10

EPS - (reported) (NZ$)

 

 

(9.84)

(0.12)

(0.17)

0.02

0.18

Dividend per share (c)

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

37.6

36.8

37.6

49.5

54.3

EBITDA Margin (%)

N/A

N/A

N/A

1.3

13.3

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

1.4

13.4

BALANCE SHEET

Fixed Assets

 

 

2,488

3,249

4,171

5,516

6,915

Intangible Assets

1,669

2,111

2,548

3,698

4,848

Tangible Assets

411

407

386

581

830

Investments

408

731

1,237

1,237

1,237

Current Assets

 

 

30,725

62,055

54,060

54,171

69,515

Stocks

14,686

17,686

18,718

21,494

24,713

Debtors

11,251

16,288

19,362

19,795

22,759

Cash

4,700

28,055

15,980

12,882

22,043

Other

88

26

0

0

0

Current Liabilities

 

 

(10,148)

(13,511)

(15,019)

(16,623)

(18,521)

Creditors

(10,148)

(13,511)

(15,019)

(16,623)

(18,521)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(20,739)

(23,161)

(23,426)

(23,426)

(23,426)

Long term borrowings

(20,739)

(23,161)

(23,426)

(23,426)

(23,426)

Other long term liabilities

0

0

0

0

0

Net Assets

 

 

2,326

28,632

19,786

19,638

34,483

CASH FLOW

Operating Cash Flow

 

 

(11,479)

(11,326)

(15,473)

763

13,342

Net Interest

(1,908)

(3,145)

(3,531)

(2,000)

(2,000)

Tax

282

42

(58)

0

0

Capex

(483)

(694)

(1,598)

(1,671)

(1,724)

Acquisitions/disposals

0

0

0

0

0

Financing

12,859

38,357

9,042

0

0

Dividends

(763)

(1,652)

0

0

0

Net Cash Flow

(1,492)

21,582

(11,618)

(2,908)

9,617

Opening net debt/(cash)

 

 

11,889

16,039

(4,894)

7,446

10,544

HP finance leases initiated

0

0

0

0

0

Other

(2,658)

(649)

(722)

(190)

(456)

Closing net debt/(cash)

 

 

16,039

(4,894)

7,446

10,544

1,383

Source: Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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United Kingdom

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NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. 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Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

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10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Metals & Mining

KEFI Minerals — Small refinements and robust numbers

On 24 May, KEFI announced an update to its 2015 definitive feasibility study (DFS) in order to account for all of the initiatives undertaken by the company in the intervening two years. Without exception, the operational parameters of the mining operation (throughput, grade, recovery, etc) were identical to our prior expectations. Cash operating costs are now expected to be just 3.5% higher (equivalent to an annualised inflation rate of 1.7%), while capex costs, although towards the top of the range of our prior expectations, are materially lower than those presented in the original 2015 DFS (albeit the latter were calculated on an owner-manager, rather than a contract miner, basis). Note that all forecasts and valuations are here presented on a post-17:1 share consolidation basis (which became effective on 2 March), unless otherwise specified.

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