RE:RE:RE:Why the volume is so low since the last few days?Highwired7,
On Teranga Gold being absurdly undervalued at $1 USD, all I know is the stock has gone from a PE of 4 to 11 since the beginning of the year. So I guess if you think gold stocks should be trading at a PE of 20, then it would still be undervalued. On insiders buying hand over fist, the only insider who appears to be buying is David Mimran, and he is buying to maintain his percentage of ownership as the stock gets diluted through the Gryphon acquisition.
However, to amplify on the risk factors:
- Rainy season--Third quarter of last year revenue went from $60 million in Q2 to $37.8 million in Q3, and that was with a strip ratio of 3.2. This year let's assume that the best that they can do is to match their Q2 2016 144,000 tones of ore mined at Gora, and 219,000 tones mined at Golouma. Strip ratio goes to 20.5, and total gold production is 54,700 ounces. Gross profit drops to $11.7 million, and net income to $221,000 USD with an EPS of $.00. All other costs modeled identical to Q2.
- Strip Ratio Factor-- Let's assume that Teranga achieves its 600,000 tone mining target for this quarter in spite of the rainy season. Strip ratio goes down to 16.7, but is still way higher than Q3 of last year. Total gold production should be 63,090 ounces with a mill head grade of 2.02 grams per tone. Gross Profit should be around $22 million and after tax profit $6.1 million USD. Strip ratio stays at 25 through all of 2017, and so EPS is highly dependent on ore production. I expect this quarter's mining cost to be up $10 million relative to Q2.
- Gryphon acquisition short term negative long term positive--How much gold production does Gryphon add in 2017? Zero 2018? Still Zero. How much cost does Banfora add over those two years? The bottom line is that EPS each quarter will be lower than it would have been otherwise through 2018.
Don't get me wrong. IMHO, the addition of Banfora gold production in 2019 is essential to cover the revenue dip that is present in the existing mine plan from 2019 to 2022. So in the long run, the acquisition is a positive move. I would just like to find out how they get there.