SHARES in Teranga Gold scaled a new all-time high in Toronto on Monday, but it wasn’t enough for the firm’s president and CEO who said the company was undervalued.
“The stock has doubled this year owing to the gold price which is a step change,” said Richard Young. “Despite the improvement, the full value of the company is not reflected.” Young’s comments followed the release of a study into its newly acquired Massawa mine.
Shares in the company closed at C$15 apiece giving he company a market capitalisation of C$2.52bn. The share was at C$4,80 in March just as the extent of the Covid-19 pandemic hit home – a time of broad equity liquidations globally.
Teranga Gold announced the $430m cash and shares acquisition of Massawa in Senegal from Barrick Gold in December. A pre-feasibility study said net cash generation over the first five years of operation would be $215m annually assuming a gold price of $1,600/oz.
Teranga would spend just under $250m on the first two phases of the mine’s development which would produce 384,000 oz in gold a year following its incorporation with Teranga’s nearby mine, Sabodala. Including Waghnion in Burkina Faso, Teranga would take total production to over 500,000 oz annually following the Massawa-Sabodala development.
“The current market is not only good for ourselves but it is good for the whole industry which is much more profitable. This is an exciting time to be a gold miner,” said Young. The gold price tested $2,000/oz on Monday before falling back to its current level, just above $1,900/oz, although analysts think the signs remain supportive for the metal.
Young said that cash flow from Massawa would help the company fund its next gold mine or acquisition whilst organic ounce replacement and growth was not yet capped.
Referring to a pre-feasibility study presentation slide showing Teranga elevated to fourth highest gold reserves among a selected peer group following the Massawa acquisition, Young said it was “just conceivable” the company would have reserves to rival Endeavour Mining, Centamin and B2Gold.
Endeavour is capitalised at C$5.9bn whilst B2Gold has a market value of $9.51bn. B2Gold said recently that assuming a gold price of $1,700/oz, it would have an operating cash flow for the year of $850m up from a previous estimate of $700m for the year. Gold production guidance for the year was unchanged at one million to 1.01 million oz.
Teranga has forecast gold production of between 215,000 and 230,000 oz from Sabodala this financial year. It expects to produce a further 130,000 oz in production this year from its Wahginon mine in Burkina Faso.
“The PFS announced today confirms that the Massawa acquisition is truly transformational for Teranga and repositions the company as a leading mid-tier gold producer with one of the lowest all-in sustaining cost profiles in the industry,” said Young.