In a week of reporting madness when the capital markets focus was as much on yesterday’s free cash flow generation as it was on the viability of tomorrow’s growth, it was a small $1.2 million building block that almost got lost amid the lacklustre lithium, glittering gold, irresistible iron and conductive copper talk.
Perth robot maker FBR (ASX: FBR) has been beavering away trying to commercialise its Hadrian bricklaying technology. Long a technical success, the focus for FBR has been to make Hadrian a commercial winner as well.
The emergence of the venture arm of construction materials giant CRH just last month as FBR’s prospective partner to take Hadrian into the US building market generated much excitement among investors, who would have been delighted with news this week of a significant milestone.
Under the suite of agreements with CRH – effectively, for FBR to prove to CRH that Hadrian is the real deal – FBR had to first demonstrate that the Hadrian X model could build a test structure in Perth comprising 751 US-format concrete masonry bricks at an effective lay rate of 285 blocks per hour, requiring no more than three FBR staff to operate Hadrian and including the use of a tablet-based Human Machine Interface.
On Wednesday morning, FBR confirmed not just the milestone had been achieved but that Hadrian X had smashed the task out of the park by laying the bricks at an effective rate of 330 per hour.
CRH now has to pay FBR $US800,000 ($1.2 million), the second of four milestone payments worth a combined $US2 million under the so-called Demonstration Program. The third and fourth payments will fall due when Hadrian X completes a similar test build on site in Florida, US, followed by the successful construction of external walls for five to 10 single-storey homes.
The signs are positive and momentum is building in FBR’s vision to introduce the Hadrian technology into the massive US housing market by finding a partner willing to help fund the construction and roll-out of dozens of these robots.
FBR has a way to go but shareholders rewarded the company for this growth reality update by marking the shares up as much as 22 per cent on Wednesday.
Growth for all
- Li & Fe: Look no further than Mineral Resources (ASX: MIN), whose boss Chris Ellison this week again threw down the gauntlet to critics of his company’s growth plans. The $3 billion Onslow Iron project remains on track to deliver first ore on ship in June while Mr Ellison talked up the optionality of his three-mine lithium division, including the ability to take Train 3 at Wodgina out of production in response to market demand without needing to shutter Mt Marion or Bald Hill.
- Au: Following Newcrest’s takeover by Newmont, Northern Star Resources (ASX: NST) is the blue chip of the ASX-listed gold brigade, both in size and quality of its assets. Halfway through a five-year profitable growth push to a sustainable production of two million ounces a year, Northern Star demonstrated in its half-year results this week the cash flow that can be generated when operations across its three production centres are humming. Record cash earnings of $702 million for the six-month period enabled Northern Star to declare a record interim dividend of 15¢ a share.
- Cu: When BHP took over OZ Minerals last year, it opened up the ASX register of copper producers for the next leader to emerge. Sandfire Resources (ASX: SFR) is pushing for that right, having transitioned over the past few years from a Western Australian producer to owner of scale operations in Botswana and Spain. Releasing its half-year result yesterday, Sandfire reaffirmed its full-year guidance, including a FY24 target of 135,000 Cu-equivalent contained tonnes. A new leadership team is gunning for continued growth – and driving costs down at the same time.
For the plethora of mining companies that reported their half or full-year results this week, investors were similarly focused on the growth story – and how real those plans were.
Growth took equal billing alongside free cash flow generation, which remains the hallmark of mining companies’ ability to operate lean and mean in what remains a high-cost environment – certainly in Western Australia.
Gold Road Resources (ASX: GOR) owns half of the world-class Gruyere gold mine, 1000km north-east of Perth, but has had to exercise patience – and test the patience of its shareholders – as JV partner Gold Fields gets Gruyere’s operation humming to the potential 350,000 ounces a year.
Gruyere produced “only” 321,984 ounces in calendar 2023, for a total of 1.24 million ounces since the first gold pour in June 2019, and this year is tipped to produce between 300,000 and 335,000 ounces.
On the face of it, the 2024 outlook is far from golden, a fact Gold Road acknowledged when it first released the guidance a month ago. Shareholders responded by marking Gold Road’s shares down.
Despite the disappointment at the modest 2024 guidance, Gold Road made clear yesterday – when it released its 2023 full-year financial results – that it can deliver strong value for shareholders even before Gruyere produces its long-awaited best.
A run of records – revenue of $472.1 million, EBITDA of $250.1 million, EBITDA margin of 53 per cent, net profit of $115.7 million, basic earnings per share of 10.73¢, operating cash flow of $233.6 million, free cash flow of $140.2 million – allowed Gold Road, inter alia, to maintain its run of dividends with a fully franked 1c a share return.
Add Gold Road’s debt-free status, its no-hedging policy and $465 million of strategic investments, not to mention Gruyere’s inevitable growth, and the future looks decidedly golden.
