Steppe Gold Ltd (TSE:STGO) has plenty of upside potential at its flagship Altan Tsaagan Ovoo (ATO) mine in Mongolia, says Stonegate Capital Partners, which has lifted its valuation on the stock.
The mining firm announced on March 25 this year that it had begun gold production at the site after its Adsorption-Desorption Recovery (ADR) plant was fully commissioned and declared ready for use on January 20.
READ: Steppe Gold ends first quarter with US$1.8 million in cash as it advances flagship Mongolia mine
On April 22, Steppe produced its first gold pour and has now sold 5,233 ounces of gold and 1,372 ounces of silver, which has generated $8.5 million net cash flow before stream obligations, noted analyst Shane Martin.
On May 11, Steppe said it was on track to produce 60,000 ounces of gold this year at cash costs of around US$500 per ounce.
Stonegate started covering the stock in April this year and put a valuation of between C$0.50 and C$1.81 on the shares with a mid-point at C$1.13. It has now lifted that to a range of between C$2.08 and C$2.45, with a mid-point of C$2.26. Steppe shares are currently changing hands in Toronto at C$1.50.
"Upside potential for the flagship project remains as Steppe has three diamond core exploration drilling rigs focusing on resource extensions at AT01 and AT04 as well as Mungu, a high grade, near surface gold and silver potential site located northeast of the current resources at the ATO project," highlighted analyst Martin.
"These expansion projects could lead to an increase in resources and expanded 150,000 oz per annum fresh rock crush and CIL operation," he added.
"With gold commencing at ATO, the company plans to continue its exploration programs with a revised resource and reserve statement in Q4 2020 or Q1 2021."
Steppe also owns 80% of an exploration-stage mineral property called the Uudam Khundii (UK) with a 20% joint venture partner.
Contact the author at giles@proactiveinvestors.com