Analysts at Hannam & Partners believe Steppe Gold shares currently have 248% upside potential after the miner announced it has secured US$150 million for the Phase 2 expansion of its ATO Gold Mine in Mongolia.
As noted by the analysts, the expansion will extend the life of the mine by 12 years to 2036 with an average annual production of 103,000 ounces on a gold equivalent basis, a total of 1.237 million ounces on a gold equivalent basis recovered, and expanded production in 2025.
“We view this as a significant positive for the company and de-risking event,” the analysts wrote.
The analysts also highlighted Steppe Gold’s recent acquisition of Anacortes Mining, which includes the Tres Cruces gold project in Peru.
This project would enter production after the commissioning of Phase 2 and would produce e 68,000 ounces per year of gold at an all-in sustaining cost (AISC) of US$734 per ounce based on the processing of near-surface oxides with an updated study expected later in the year, the analysts noted.
“Advancing this project should also be a catalyst for the shares,” they wrote.
In justifying their price target for the stock of C$2.85 per share, the analysts wrote that their valuation was underpinned by the ATO project. Steppe Gold shares traded at C$0.82 at their time of writing.
“We value Steppe based on a discounted cash flow (10%) for ATO, plus a value of C$14 million for the UK project in Mongolia and C$20 million for Anacortes. This generates a net asset value (NAV) for the assets of C$363 million on an unrisked basis,” they explained.
“We apply a price to net present value (P/NPV) multiple of 0.8 times to ATO to derive a risked target price of C$2.85/share which implies 248% upside to the current share price.”
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