Broken Hill Mines prepares for a higher-grade June quarter
Broken Hill Mines (ASX:BHM) delivered a March quarter that hints at something bigger than the headline numbers suggest. Cash flow from operations jumped 45% to A$2.4 million, and metal production rose sharply across silver, lead, and zinc. But the bigger story is what is coming next. Management has confirmed that mining at the high-grade Pinnacles deposit will start in the June quarter, giving the company a third feed source. We believe this could be the moment Broken Hill Mines moves from a one-mine producer to a genuine multi-mine cash generator. The question is whether the market has fully recognised what is about to happen.
Rasp Mine Hits Its Stride
The Rasp mine had one of its best quarters in some time. Higher grades from the new Main Lode source pushed the average ore grade up 29% from the previous quarter. That single change drove silver output up by more than half and lead production up nearly 50%, while zinc also moved higher.
What really stands out for investors is that production costs actually fell 6% to around A$19 million even as output grew. That points to a healthier, more efficient business as it scales. We believe this is more than a one-quarter result. Management has guided even more Main Lode tonnage in the June quarter, which suggests the lift is just getting started. For a company that has been working through a long ramp-up, this is the kind of operational momentum shareholders have been waiting for.
Pinnacles Could Be the Real Game-Changer
Pinnacles is where things get really interesting. The deposit is widely considered one of the highest-grade and shallowest sources of silver, lead, and zinc in the Broken Hill region, and mining is set to begin in the June quarter. Recent drilling continues to support the case, including a peak intercept of 56.1% zinc equivalent over 2.2 metres within a broader high-grade zone at the Perseverance target, some of the strongest grades the company has ever reported.
In our view, going from one mine to three feed sources is not a small upgrade. It is a step change in the production profile, and it should support both higher revenue and stronger margins over time. The main thing investors need to watch is execution. Ramping up a new mine is rarely smooth, and timelines can slip. However, the quality of the deposit suggests the upside, if delivered, could be meaningful.
The Investor’s Takeaway
At a market cap of around A$245 million and a share price near A$0.78, Broken Hill Mines is priced as a growth story rather than a deep value play. With about A$38.6 million in cash and total liquidity of around A$75 million, the enterprise value sits near A$170 million. That is a reasonable valuation for a producer already generating positive operating cash flow and on the cusp of bringing a third high-grade mine online, but it does mean the upside depends on execution rather than a re-rating from bargain levels.
The risks are straightforward. Broken Hill Mines are concentrated in one region, base metal prices can be volatile, and there is still capital spending to come on items like the new tailings dewatering plant. For existing holders, we believe the investment case has clearly improved over the past quarter. For new investors, the June quarter’s Pinnacles start is the confirmation event worth waiting for. Either way, this is a small-cap to keep firmly on the watchlist.
