Analysts at Stonegate Capital are positive on Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF) following the Mongolia-focused gold firm closing its acquisition of the Boroo Mine from Boroo Singapore on August 1.
“The immediate cash flows from the acquisition provide additional financial flexibility,” analysts wrote in a note to clients.
“Additional cost savings and synergies are anticipated as Steppe and Boroo integrate their operations.”
The acquisition makes Steppe Gold the leading gold producer in Mongolia, expected to produce 80Koz to 90Koz in 2024 and 2025, analysts highlighted.
“Per the most recent technical report, the Boroo Mine has a net present value (NPV) of $191 million using a discount rate of 5% and a gold price of $1,750 per ounce,” they wrote.
“We note that this gold price per ounce is significantly lower than current spot prices giving upside to the last stated NPV.”
They noted that Steppe Gold's sale of the Tres Cruces project for C$12 million to Boroo Singapore “brings Steppe’s focus back to Mongolia and provides additional liquidity into the company.”
Further, they highlighted progress in the expansion of Steppe Gold’s core Altan Tsagaan Ovoo (ATO) project.
“The technical report estimates after-tax NPV5% of US$242 million, an internal rate of return (IRR) of 67%, and a payback in three years with the assumption of $1,700 per ounce gold, $20 per ounce of silver zinc price of $2,500 per ton, and lead price of $1,970 per ton,” they wrote.
“Production in Phase 2 is expected to start in 1Q26, with the first $50 million tranche drawn from the fully funded $150 million finance package to accelerate the construction and development of Phase 2 Expansion.”
Analysts concluded: “The company has a proven in-country leadership team that has a track record of value creation and operational excellence with the demonstrated ability to enhance operations, obtain necessary permits, and deliver on expansion projects.”