Broker Stonegate Capital Partners is encouraged by Steppe Gold Limited (TSX:STGO, OTCQX:STPGF)’s commercial progress at its Altan Tsaagan Ovoo (ATO) gold project in Mongolia and has set a stock valuation target range of C$2.00 to C$3.75 per share with a mid-point of C$3.00.
Stonegate noted that Steppe Gold’s flagship project ATO is fully constructed and began producing gold and silver in the spring of 2020. In 2021, the ATO mine produced 12,012 ounces and sold 12,899 gold ounces, and 29,705 silver ounces for revenue of US$24.1 million.
For 2022, the company is projecting about 40,000 to 50,000 ounces of gold recovery driven by stacked ore and additional production. The company is currently ramping production with 1Q 2022 production of 2,385 ounces followed by 2Q 2022 production of 10,329 ounces, according to the Stonegate report.
READ: Steppe Gold rapidly advancing Phase 2 expansion at ATO mine, new crusher nearing completion
The analysts noted the ATO property is, “projected to produce strong annual cash flows with annual production of around 50,000 ounces of gold from the heap leach operation with cash cost per ounce of around US$550 over the life of the mine.” Stonegate added that Steppe Gold believes this could equal $40 million-plus of EBITDA.
Stongate said that Steppe has almost completed the construction and installation of the phase two crushing circuit, which is four times the current capacity, and that the mining company has approval to connect to the state power grid. The latter will equal over $100 per ounce in savings.
The analysts said Steppe Gold’s management is well established and has a long operating history in Mongolia.
“The company’s newly appointed CEO, Bataa Tumur-Ochir, has extensive experience operating in Mongolia as CEO of Wolf Petroleum Ltd (ASX:WOF), an oil and gas exploration company, and Hunnu Coal Limited, a Mongolian coal company,” said the analysts.
Stonegate said it used a DCF analysis of mine models for phase one and two at the ATO mine. Combining the separate valuations for phase one and two, they arrived at a the stock valuation target range of C$2.00 to C$3.75 per share with a mid-point of C$3.00.
Stonegate said it does not have, nor has previously had, a rating for any securities of Steppe Gold.
Contact the author at susie@proactiveinvestors.com