Teranga Gold (TSX:TGZ, Stock Forum) (57 cents)
www.terangagold.com
Commodities remain under pressure but gold has shown a strong ability to hold support at $1100. For those of you that still have faith in the sector, Teranga is well worth looking at as they are one of the highest quality microcap gold stocks on the TSX with strong support in the low to mid $0.50’s.
I have explained why below but it is possible Teranga could eventually become a takeover target IF it remains low through 2016. The market cap at 55 cents is approx. $195 million and as I have shown below (rough valuation), the company should be worth closer to $400 million.
VALUATION SCENARIOS
Teranga Shares Outstanding: 353 million
Market cap at 55 cents = $195 million
June 30th Financials:
Cash: $38 million / Gold Inventory $23 million = $61 million
Property, Plant, Equipment and Mine Development Assets: $459 million
+ Inventories: $131 million = $590 million
Accounts Payable: $49 million
Non-current liabilities & provisions: $33 million / Deferred revenue: $80 million
Valuation Scenario (1):
Tangible assets less debt (excluding deferred revenue) = $569 million
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Estimated Valuation Based Upon Gold Ounce Reserves ONLY:
a) 6 million ounces in the measured & indicated x $40/oz = $240 million
b) 2 million ounces inferred. X $20/oz = $40 million
Valuation Scenario (2):
Based purely on gold reserves: $280 million
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Fair value maybe somewhere between (1) $569 million and (2) $280 million
= $425 million
Versus the current market cap near $200 million
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Based upon $1,200 gold, their objective is to produce 230k to 240k ounces per year from 2015 to 2017.
Cash costs are forecast near $600 per ounce with All-in sustaining costs of $900 to $975 per ounce.
Their September corporate presentation provides very good due diligence.
https://www.terangagold.com/files/doc_presentations/2015/09-22-15-Teranga-Gold-DGF-Presentation-(Sept-21)-Final.pdf
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Disclosure (shares always purchased in the open market):
Danny Deadlock owns 30,000 shares of TGZ.
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