Update: Teranga Gold Reports Solid Q3 Results
Nov. 1, 2014 7:30 AM ET | 1 comment | About: Teranga Gold Corp CDA (TGCDF)
Disclosure: The author is long TGCDF. (More...)
Summary
• Teranga Gold reported Q3 results Friday. The company earned $2.4 million in profit on sales of 44,573 ounces of gold.
• All-in sustaining costs came in at $954 per ounce, but should fall further over the next few quarters.
• Teranga also expects a better Q4, with higher production and lower costs. By the end of the year, the company should be debt-free.
• Most gold miners have fallen sharply in price, as has Teranga; I think shares are a buy here regardless.
Teranga Gold (OTC:TGCDF) reported Q3 2014 results on Friday, and investors should be fairly pleased with the results. Here is a summary of the highlights:
• Revenue increased 12% to $56.7 million on gold sales of 44,573 ounces.
• Total cash costs were $781 per ounce sold and all-in sustaining costs were $954 per ounce sold for the three months ended Sept. 30, 2014.
• Consolidated profit for the quarter was $2.4 million or $.01 per share.
• The company expects a stronger fourth quarter, with higher production of 75,000 ounces and lower costs resulting from higher grades mines at Sabodala and higher production from Masato.
• Teranga had a cash balance of $28 million at the end of the quarter, and the company remains on track to retire the balance of its debt facility outstanding by the year's end, resulting in a debt-free company.
Previously, I argued that shares of Teranga are a buy, as the company expects to produce 250,000 ounces of gold annually at industry-leading cash costs. In addition, insiders of the company were buying up shares left and right, only strengthening the investment case in my view. I also saw the $135 million gold stream by Franco-Nevada (NYSE:FNV) as a major third-party validation of the quality of Teranga's assets.
I think the quarterly results were positive as it shows Teranga is profitable despite lower gold prices. With all-in sustaining costs at $954 an ounce and expected to drop further next quarter, this is huge as the price of gold continues to fall below $1,200 an ounce.
The company also expects a stronger fourth quarter with higher production and lower costs, which is great timing since gold now sits in the $1,150 range, so the lower gold price shouldn't hurt profitability too much. Despite the positive results, Teranga has fallen more than 10%, as have most gold miners. But the stock remains a long-term buy in my view, as Teranga is on track to accomplish its production goals and become a debt-free company by year's end, making it less risky than many of its peers. For these reasons, I think the miner is one of the best juniors on the market, and is an interesting long-term buy here.