Steppe Gold Limited (TSX:STGO, OTCQX:STPGF) is a stock "ripe for a re-rate," according to broker Stifel GMP, which has repeated a 'Buy' on the shares following the miner's first quarter operational and financial results.
Gold production in the three months ending March 31 was 2,385 ounces compared to the broker's modeled 1,532 ounces - the increase being due to residual leach production through January/February, noted analysts.
Adjusted earnings per share (EPS) of $0 beat Stifel's expected loss per share of $0.06 due to higher production, which was marginally offset by higher than expected cash costs of $966 per ounce versus the broker's expectation for $774 per ounce.
Sales in the quarter totaled 2,983 ounces, while revenue was $5.5 million, compared to $1.9 million for the first quarter of 2021.
"The stock is trading at an attractive spot P/NAV of just 0.20x, below peers at 0.45x. With critical reagent supply secured, production gaining momentum, and drill results expected for ATO and UK we see the stock ripe for a re-rate," said Stifel analysts.
READ: Steppe Gold reports 1Q revenue boost as company ramps up production at its ATO mine in Mongolia
They noted that output continues to ramp up from the ATO mine following the restart of cyanide deliveries to site in the first quarter. The company currently has three months’ worth of this process solution stockpiled on site and remains on track to build a six-month inventory by the end of June.
"Steppe is now focused on maximizing ATO’s production to build a cash position which it will use to fund a significant portion of the Phase 2 Sulphide expansion," noted the analysts.
"We have reconciled our model with ATO's expected production and cost structure and reduced our equity raise assumption given the company's stronger cash outlook," they added.
Steppe Gold is a precious metals exploration and development company aiming to build itself into the premier precious metals company in Mongolia.
Contact the author at giles@proactiveinvestors.com