A target price of 450 pence suggests there is significant blue sky for investors who take the plunge now at around 133 pence.
SP Angel’s veteran analyst John Meyer reckons the company’s self-funded expansion, which will take output to 200,000 ounces of gold, has largely gone unnoticed by the market.
Rather, the stock has been dogged by concerns the company may not be able to meet capital requirements to complete the expansion at the Co-O mine in the Philippines. Meyer said these fears are “unfounded”.
“For next year the target is for a significant uplift to 200,000 ounces,” he explained in a note to clients.
“Even if the ramp up to achieve this is slower than expected the company should deliver significant value to shareholders with high free cash flow yields well above ten per cent even with low gold price assumptions and any production shortfall.”
The analyst pointed out Medusa enjoys a low cash cost of $400 an ounce and this puts the group in an “enviable position” relative to the rest of the sector.
Certainly, Medusa’s attractions are becoming apparent to the savvy investors, with Blackrock recently revealed as the 5.05% shareholder.
Meyer concludes: “The recent weakness in the share price provides a good entry point.”