I think there is plenty blue sky but investors need to be able to stomach the country risk.
We have a company now with a market cap of around $330M. Here are a summary of some key points I've taken from listening to the recent webcasts and analysing the recent financials and operational reports which caused me to buy for the first time couple days ago (obviously I wish I'd waited a couple days). There are plenty more notable comments I could make (Especially on exploration results that I've taken a close look at - one particular project looks ridiculously good), but these are sufficient I believe.
- It will be producing around 200k oz for next 12 months at a production cost of around $900...this includes a significant prestripping cost that will come down in future years, ie the future higher strip ratio is temporary. The additional ozs will no longer be subject to a super pit, but rather a underground approach (while they need to confirm the studies to ensure viable, it is just a technicality - the ozs are feasible).
- Of the 200K, around 55K oz are deliverable at hedge price of $825 but thats it, from thereon, the rest is at spot price.
- From 2014, the Gora satellite will be adding another 50k oz per annum (at a margin of around $800 per oz) for 4 years, which adds around $110M cashflow after excluding $50M development cost (most of which is on mobile equipment, which is very important to note for the development of inevitably more satellite deposits found)
- there is much more softer rock becoming available later (refer conference call webcast). The rate at which they blend this in depends on whether they are struggling to achieve their production targets year on year
- watch out for acquisitions of in country ozs. The current drop in POG while a pain short term for their financials is a boon long term...there are plenty of ozs in Senegal being found but many of the owners will be willing sellers even moreso now the POG is falling. None of them really want to development the mine themselves and TGZ has the only operating mill in the country and so are in box seat to snap these up
I'll be buying more shortly.
Cdchi1
TGZ Price at posting:
$1.30 Sentiment: LT Buy Disclosure: Held
