Steppe Gold Ltd: The New Gold Company On The Block And Why We Like It

Palisade Research May 22, 2018
Category: Research

The latest gold company that is offering exciting opportunity is Steppe Gold (TSX:STGO).

And it just began trading publicly today – valued at an C$86 Million Market Cap. . .

Steppe Gold is an an advanced stage gold developer that expects to be in production by late 2018. Their flagship project is The ATO Project – which is in Mongolia.

The ATO Project will be a low-cost, heap leach gold and silver mining operation. Compared to other mines, ATO has a low CapEx (capital expenditure).

Here’s a quick overview. . .

The ATO Project currently has 1.26 million M+I (measured and indicated) ounces of gold. But the company is targeting 2-3 million ounces gold below the current resources. A 20,000-meter drilling program is underway to unearth what lies beneath.

The ATO Project is expected to have first gold pour by Q4/2018.

Management is aiming to produce roughly 37,000 ounces of gold equivalents (AuEq) per year with a cash cost of only $333 per ounce from oxide ore. With such low mining costs at the ATO Project, this gives each gold ounce mined a huge profit margin for shareholders.

Simply, the lower the cost of mining – the higher the return on investment per ounce. . .

The ATO Project has a simple structure – it will be an open-pit heap leach mine. The construction cost (CapEx) is only $20,000,000 – this paired with the low mining costs makes for very attractive project economics.

So far, ATO’s mine life is only 5 years. But we expect as the company further drills their property that they will add more resources – making this a potentially very long-life operation.

Better yet, the company has an impressive pipeline of mineral rich exploration targets. . .

The ‘Mungu AU-AG’ discovery at the ATO Project and the ‘Uudam Khundii(UK) Property’ provide exciting potential for increasing their existing resources.

 

What we like the most is that the company’s going public at a significant discount to NAV – net asset value. . .

For instance, if using the peer averages 2018 EV/EBITDA of 4-6x multiple, this implies C$3.90-5.90 price range for Steppe Gold.

That’s large potential upside from current prices and offers investors a thick margin-of-safety.

This is just one example of the discounted valuation Steppe Gold trades at relative to other gold mine developers.

 

Steppe Gold’s post-IPO share structure is tight with only 42,900,000 shares outstanding. They have a clean balance sheet with $25 million cash on hand. 

 

I can’t forget to mention that Steppe Gold has an outstanding management team that knows how to operate mines in Mongolia. . .

The Chairman, President, and CEO – Matthew Wood – was the co-founder of the Mongolian coal company, Hunnu Coal Limited. It was later sold for $500 million.

Their team consists of Mongolian nationals that have deep government ties. This is extremely valuable in a country like Mongolia.

The company has many catalysts upcoming this year that will generate shareholder value, such as. . .

Complete construction of ATO heap leach and pour first gold. . .

Release results from the ongoing 20,000-meter drilling campaign, and launch the 5,000-meter drilling on the UK Property. . .

Issue a maiden resource for the Muungu Au-Ag Discovery. . .

Begin the feasibility study at ATO to significantly increase gold production. . . 

We will release a more in-depth report about the opportunity Steppe Gold offers soon.

Palisade Global Investments Limited holds shares of Steppe Gold Ltd. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report’s from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence.

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