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Stifel GMP upbeat on Mongolia-focused Steppe Gold following ATO Phase 2 expansion plan update www.proactiveinvestors.ca
On August 30, Steppe reported positive progress on its Phase 2 expansion plan at the mine after it received a landmark power agreement and is constructing a new fixed crusher, which is expected to be completed in October this year
Broker Stifel GMP is upbeat on Mongolia-focused miner Steppe Gold Ltd and expects its shares to re-rate as the company continues to execute steady production at its flagship ATO mine.
On August 30, Steppe reported positive progress on its Phase 2 expansion plan at the mine after it received a landmark power agreement and is constructing a new fixed crusher, which is expected to be completed in October this year.
The installation is 72% complete and, once operational, the new unit will increase Steppe's current processing capacity by four times, up to 4 million tonnes per annum at 50% of its power.
Analysts at Stifel said Steppe was continuing "to execute well following ATO's leaching restart with the market starting to reward this success".
"However, there is still room to re-rate higher towards the junior producer peer group average of 0.41x," they added.
"We expect this re-rate to continue as the company demonstrates steady gold production at ATO through the rest of the year and as the first ever drill results from UK are received in Q3."
"We model ATO's oxide reserves processed at a rate of 2,300 tpd depleting in Q3 2025 (with some assumed reserve additions). Completion of the crusher ahead of schedule has the potential to accelerate this production and pull forward sale of those ounces to provide a greater portion of the equity funding for the Phase 2 Expansion," said the analysts.
Stifel also noted it was "encouraged" that the miner's sulphide floating plant construction was on track for 2024 (in line with the broker's model) and that that connection to the power grid demonstrated support from the government and opportunity for lower costs.
Stifel rates Steppe a 'Buy' and targets C$2.90 a share (current price: C$1.10).
Contact the author at giles@proactiveinvestors.com
Published Date:2022-09-01
