Stifel GMP has repeated a 'Buy' recommendation on Mongolia-focused producer Steppe Gold Limited (TSX:STGO, OTCQX:STPGF) following the miner's recent second-quarter results.
Analysts at the brokerage said they were looking forward to the results of the second phase feasibility study into expanding the group's flagship producing ATO project and the restart of leaching there.
READ: Steppe Gold making strong recovery following coronavirus related setbacks
Also ahead are the first results from exploration drilling at the company's Uudam Khundii (UK) property, they noted.
As has been previously reported, the firm ceased leaching (but continued stacking) at ATO in early July this year due to issues surrounding cyanide supply.
Gold production in the three months to June 30, 2021 came in at 7,202 ounces (oz) and 762 ounces silver, which was below Stifel's estimates for 9,700 oz gold and 4,100 oz of silver.
But despite output being lower than projected, Steppe had said it was confident that with reagent supply resumed it will still finish the year strongly.
The company also reported that there was 1.6 million tonnes stacked on the leach pad and a further 450,000 tonnes on the ROM pad, adding to Steppe’s "strong gold and silver inventory build-up through the year".
Stifel said it had "tempered" its near-term production expectations for the ATO mine to 14,000 oz gold for 2021 and 25,000 oz for 2022.
"The company has indicated that the Feasibility Study for the fresh rock expansion at ATO is nearly finished, and is set to release key highlights in the coming weeks," analysts added.
"We have adjusted our model following discussions with management and have increased our initial capex to $125m, adjusted our throughput rate to 6,200 tpd (from 6,800 tpd) and increased our operating unit cost by 12% to $53/t processed," they said of the expansion project.
"This puts our model for the sulphides at 110koz/yr with a total cash cost of $1,125/oz (GEO basis). We have also pushed out the anticipated start of commercial production to Q4, 2023 given the ongoing logistical issues," they added.
Stifel repeated a 'Buy' on the stock but reduced the target price to C$2 a share (from C$3.70 previously) as a result of the broker's reduced net asset value (NAV).
Contact the writer at giles@proactiveinvestors.com