Analysts at Stifel reiterated their “Buy” rating for Steppe Gold Limited (TSX:STGO, OTCQX:STPGF) as they noted that the ramp-up remains on track at the ATO Gold Mine, with May production exceeding their estimates.
Steppe Gold announced May production results for its ATO oxide heap leach following the restart of leaching on March 1, 2022. The company said gold production has continued to increase in May, with another two gold pours leading to roughly 3,800 ounces (oz) of production for the month.
Production momentum continues at ATO with May production 13% ahead of April's 3,370. It also compares favorably to 1,532 oz produced in March.
In a note to clients, Stifel pointed out that production is set to exceed their expected 9,840 oz for the second quarter at the current run rate.
“We're pleased to see the ramp up at ATO going so smoothly and that the rate of production is increasing faster than we had expected.With leaching firing on all cylinders we see excellent potential for Q2 gold production to exceed our estimates,” said Steppe Gold analysts.
“With the mine generating positive cashflow and the country re-opened after COVID 19, it has allowed the inaugural drill program to start at the Uudam Khundii (UK) property,” they added.
The company's 85% owned Uudam Khundii (UK) property is in the south of Mongolia between two properties that make up Erdene Resource's Bayan Khundii project.
“STGO stock currently trades at a spot P/NAV of 0.19x - too steep a discount to its junior gold producer peer group average of 0.45x,” noted the analysts.
Stifel added that it expects the stock to “re-rate as the team continues to execute strong production at ATO,” construction progresses for the Phase 2 Sulphide expansion project and drill results are received from UK.
“We maintain our target price of C$3.50 and our Buy rating for the shares,” the analysts concluded.
Steppe Gold’s shares currently trade for C$1.27.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive