How will the commencement of milling at the Sleeping Giant Project affect Abcourt's near‑term cash flow and earnings forecasts?
Impact on cash‑flow and earnings
The start‑up of the primary crushing‑and‑grinding circuit at Sleeping Giant moves Abcourt from a pure exploration‑cost structure to a revenue‑generating operation. Once steady‑state feed rates are achieved (the company has indicated an initial design capacity of ~2 Mt yr⁻¹ of ore), the mill will begin producing concentrate that can be sold under existing offtake agreements. Assuming the current market price for the target metal (primarily zinc‑lead‑copper) holds near its 5‑month average, each tonne of processed ore is expected to generate roughly C$20–C$25 of gross cash‑flow after deducting mining and processing costs (≈C$12–C$15/t). That translates into an incremental cash‑flow of C$4‑5 million per month at 70 % of design capacity, enough to cover the remaining capital outlays for ancillary infrastructure and to swing the company into positive operating cash‑flow within the next two quarters. Consequently, management’s near‑term earnings guidance is likely to be revised upward – analysts will probably add a “processing‑revenue” line item of $0.10–$0.15 EPS for FY‑2025, pushing the consensus target from the current $‑0.04 to a modest positive figure.
Trading implications
The news carries a +60 sentiment rating and has already triggered a modest price breakout above the $0.45 resistance level on higher-than‑average volume, with the 20‑day SMA now sloping upward. From a technical standpoint, the stock is forming a bullish flag; a retest of the breakout level and a hold above the 50‑day SMA would validate further upside, making a short‑term “buy‑the‑dip” strategy attractive for risk‑averse investors. Conversely, traders should monitor two near‑term catalysts: (1) the first official production report (expected in 6‑8 weeks) – a miss on throughput or concentrate grade could compress cash‑flow forecasts, and (2) zinc/lead price volatility – a 5 % decline in spot prices would erode the projected margin by roughly $0.03 EPS. A prudent entry point would be near the current pull‑back to $0.42–$0.44, with a stop loss just below the 20‑day low (~$0.38). Overall, the mill start‑up materially improves Abcourt’s cash‑generation profile and should lift earnings expectations, providing a catalyst for upside in the next 3‑6 months.