Pure Gold Mining Inc. has had its rating upgraded to ‘Buy’ and its target price set at C$1.60 by Stifel GMP.
The Canadian full-service brokerage and investment firm cited the company’s recently completed C$23M equity financing which, “significantly improved its balance sheet,” as a catalyst to the upgrade.
Analysts also noted that Pure Gold will benefit from continued growth in gold prices. The yellow metal continues to trade near historical highs and is currently selling for US$1,753 an ounce (oz).
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“Based on our estimates, [Pure Gold] will remain compliant with its debt covenants as long as gold prices remain above $1,400/oz, with spot prices currently at $1,750/oz providing a comfortable margin of safety,” the report read.
Analysts are also anticipating a meaningful improvement in production and costs for the gold company over the next 12 months.
“For conservative measure, and until more proof of operating execution is delivered, we have also incrementally increased costs for 2022 while maintaining our production forecasts,” the analysts wrote.
The cost adjustments, paired with the equity financing prompted Stifel to reduce its net asset value per share (NAVPS) estimate by 7.6%.
The NAVPS reduction was largely due to an increased share count (22 million shares plus 11 million warrants) and adjusted 2022 costs.
Looking ahead
For the coming year, the analysts added incremental operating costs which increased the all-in sustaining costs (AISC) forecast by $70/oz, to $1,200/oz, while maintaining their production estimates.
“We are maintaining our throughput forecasts at 875 tonnes per day (tpd) in 4Q and 950tpd in 2022 to achieve a 2H 2021 production estimate of ~29,000 (koz), in line with company guidance of 27-32 koz,” analysts said.
A recently completed mill upgrade is anticipated to allow Pure Gold to stabilize production rates at 1,000tpd by the end of the year, with 4Q targeting throughput of 850-950 tpd.
Overall, production and costs are forecasted to improve for Pure Gold each quarter of 2022.
“With a stronger balance sheet in hand, the operation set to turn the corner, and expectations by the market largely tempered over the past few months, in our view, we believe the current share price represents a more attractive risk/reward profile and attractive entry point for investors,” the analysts concluded.
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