Sonoro Gold Corp (TSX-V:SGO, OTCQB:SMOFF)'s share price is expected to be driven higher as the company advances its Cerro Caliche gold project in Sonora State, Mexico towards production, analysts at Red Cloud Securities believe.
They have initiated coverage on Sonoro with a ‘Buy’ rating and a C$0.25 target price, representing a 525% return to target from its current share price of C$0.04.
Upcoming catalysts for the company are expected to be the receipt of final permits for Cerro Caliche, drill results from high-grade targets in the western part of the resource, and the start of construction at the project.
Sonoro has completed Environmental Impact Studies and filed a Mine Permit Application in 2022.
The analysts noted that while the current federal government has been slow to issue permits, a general election is scheduled for June 2024 which could be a positive catalyst for mining in the country.
“With an advanced heap leach project with exploration potential and a modest capex, in our opinion, Sonoro is among the best positioned gold developers poised to benefit from opening up of permitting in Mexico,” the analysts wrote in a note to clients.
They highlighted that Cerro Caliche hosts a 2023 indicated and inferred resource of about 440,000 ounces of gold equivalent and it remains open for expansion.
Sonoro’s two projects Cerro Caliche and San Marcial are in a “prime location” among operating mines in Sonoro State operated by mid-tiers and majors.
The analysts also noted management’s focused experience in Mexico as a positive.
“Sonoro is led by a highly experienced management team, with a range of skill sets and a particularly high level of experience with heap leach projects in Mexico,” they wrote.
“The team includes finance executives with prior mining company management experience, geologists with major discoveries in Mexico, and a mining engineer who has built heap leach projects in Mexico.”