Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF) is a precious metals company to keep an eye on, according to analysts at Stonegate Capital Partners.
In a note initiating coverage of the company published in January, Stonegate issued a price target range of C$3.13 to C$3.49 with a midpoint of C$3.31. Steppe shares traded at C$1.13 on Thursday morning.
The analysts noted that Steppe Gold’s flagship project Altan Tsaagan Ovoo (ATO) is fully constructed and began producing gold and silver in the spring of 2020, including 33,500 ounces in 2022.
READ: Steppe Gold sees 180% year-over-year increase in gold production at ATO project in Mongolia
“Management has indicated that they have a total recoverable gold inventory from oxide ores at approximately 80,000 ounces,” analysts said. “... The ATO property is projected to produce strong annual cash flows with annualized production expected to produce ~50,000 oz of gold per annum from the heap leach operation with cash cost per ounce of ~US$550 over the life of the mine.”
Additionally, Steppe has three diamond core exploration drilling rigs focusing on resource extensions at AT01, AT04 and Mungu, a high-grade, near-surface gold and silver potential site located northeast of the current resources at the ATO project.
“Included in [Steppe’s] year-end update was a large supply of reagents thanks to a strong supply route leading to uninterrupted operations since the resumption of irrigation in the spring,” analysts wrote. “Without the presence of technical or operational issues, this correction in supply chain management leads us to believe that operations should continue uninterrupted for the foreseeable future.”
The firm cited a feasibility study published in November 2021 for the expansion of the ATO Gold mine, which came up with production of up to 100,000 oz of gold annually, an estimated mine life of 12.5 years, and an after-tax net present value 5% of $232 million with an internal rate of return of 67% and payback in three years.
Production on phase two is expected to begin in the second quarter of 2024.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel