Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF)’s acquisition of the Boroo Gold Mine should provide the company with additional liquidity, analysts at Stonegate Capital Partners believe.
In April 2024, Steppe revealed a deal with Boroo Singapore to sell the Tres Cruces project in Peru for around C$12 million, payable in installments.
Analysts at Stonegate view the deal favourably and bring the gold miner’s focus bank to Mongolia.
The Boroo Mine presently produces around 65,000 to 70,000 ounces of gold annually, Stonegate noted, with an anticipated production of 430,000 ounces by 2031.
According to the latest technical report, the Boroo Mine boasts a Net Present Value (NPV) of $191 million, calculated at a 5% discount rate and a gold price of $1,750 per ounce.
“This asset will maintain Steppe’s position as the largest gold producer in Mongolia,” analsyts noted.
“We note that this gold price per ounce is significantly lower than current spot prices giving upside to the last stated NPV,” they added.
The Stonegate note highlighted the significance of mining in Mongolia's economy, contributing to 28% of GDP and 92% of exports. This sector serves as a major driver of economic growth in the region.
The Mongolian People’s Party, the current majority government, supports foreign investment and initiated the "Gold-2" program in 2017, aimed at bolstering gold companies and doubling annual gold production by the end of 2020, analysts noted.
“Steppe Gold has been a recipient of this 'Gold-2' program and is considered a national success story,” they wrote.
Analysts have assigned a valuation on Steppe stock of C$1.69 to $2.49 with a midpoint of $2.09. Conversely, employing an EV/Reserves multiple range of 100x to 150x yields a valuation range of $1.49 to $2.57, with a midpoint of $2.03.
Steppe Gold shares traded around C$0.63 in Canada on Friday.