Stifel GMP has maintained a 'Buy' recommendation on Steppe Gold Limited (TSX:STGO, OTCQX:STPGF) after a site visit to its ATO mine in Mongolia that highlighted a steady-state operation with a focus on growth and environmental, social and governance (ESG) commitments.
Analysts at the brokerage noted that the oxide mine is well-positioned for production success and reserve growth, with early Phase 2 Sulphide expansion work well underway. The team at Steppe Gold is knowledgeable and dedicated to responsibly growing the company, they added.
“We came away impressed with the modern and growing nature of the country, set up to maintain steady-state mine operations, early work to support the Phase 2 Sulphide expansion project and dedication to ESG principals,” the analysts said. “The capital of Ulaanbaatar is an impressively urban city with the trappings of economic growth evident.”
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The analysts said ATO has an extensive, high grade blasted oxide ore stockpile with crushing operations going steady and large areas of the leach pad under irrigation now that a reliable supply of process chemicals has been secured.
The company's commitment to ESG starts with its identity as a 'Mongolian' company with 99% of employees and contractors domestic hires and reclamation work for the greater than 10-year asset already ongoing, they added.
The analyst also noted that Steppe Gold trades at a discount valuation with a spot price to net asset value (NAV) of just 0.17 times versus the junior producer peer average of 0.44 times.
“We believe the stock will re-rate as several quarters of steady-state production produce undeniable amounts of free cash flow and the market starts to give full credit for the Phase 2 Sulphide expansion following a formal construction decision announcement,” the analysts said. “In terms of catalysts, we look forward to additional exploration results at depth from the ATO sulphides, an updated resource for the ATO oxides and inaugural drill results this summer. We also look forward to continued strong monthly production results and the formal kick-off of the full Phase 2 Sulphide Expansion construction.”
Stifel repeated its 'Buy' on the stock with a target price of C$3.50 a share.
Contact the author at stephen.gunnion@proactiveinvestors.com