Analysts are upbeat on gold miner TRX Gold (TSX:TNX, NYSE-A:TRX) after the company's recent solid set of full year results and its growth prospects for 2023.
The firm is ramping up capacity at its Buckreef gold mine in Tanzania, where it also aims to increase the current resource and advance the sulphide project, which represents 90% of current resources.
Analysts at Alliance Global Partners, which has a 'Buy' rating on the shares and a $1.50 price target, said the full year 2022 results were "roughly" in line with their estimates, but highlighted the year saw the mine achieve its main aim of reaching commercial production at Buckreef.
"Additionally, we note that cash costs have declined significantly (quarter-over-quarter) as throughput continues to ramp up toward the 1,000+ tons per day (tpd) nameplate capacity," they noted.
READ: TRX Gold ends fiscal year 2022 with $15.1M in revenue; Buckreef Gold sets a record by pouring 3,619 ounces of gold in 4Q
"Given our belief that much of the heavy lifting was completed at Buckreef during 2022, we expect 2023 to feature continued positive cash flow generation and gold production growth on the back of throughput achieving steady-state capacity of 1,000+ tpd.
"As such, we continue to view TRX as an undervalued low-cost gold producer with additional production growth and exploration upside on the horizon."
Record gold production
Elsewhere, HC Wainwright & Co highlighted the company's $2.4 million of operating cash flow in Q4, versus $2 million in Q3, which it will use to "organically fund production, resource growth, exploration, and continued advancement of its sulphide development project".
"During FY23, TRX presently expects to produce between 20,000 – 25,000 ounces (oz) of gold at a total average cash cost of $750 – 850/oz of gold. We note that the company also recently exceeded its monthly guidance of 750 – 800oz, having poured 3,619oz during 4Q22 (+32% QoQ), which has set a new quarterly record," said analysts.
"Going forward, the firm intends to increase its average annual throughput at site by 75 – 100%, based on the addition of a new ball mill, which is currently not yet considered in FY23 production guidance."
The broker repeated a 'Buy' stance and has a price target of $1.10 (from $1 previously).
Lower spending
Meanwhile, broker Roth Capital Partners noted that TRX Gold was evaluating the potential for processing the underlying sulfide ore by using its existing recovery process.
"This presents the opportunity for TRX to bypass a larger capital spend on a flotation plant and increase production in a more flexible manner out of cash flow, thereby minimizing shareholder dilution," said its analysts.
Roth rates share a 'Buy' and has a 12 month price target of $1 a share on the stock.
TRX Gold shares are currently changing hands in Toronto for C$0.46.
Contact the writer at giles@proactiveinvestors.com