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Teranga Gold: I Am Optimistic In The Medium Term


  • Teranga is a mid-cap gold mining company operating the Sabodala mine in Senegal.
  • In my opinion, the company's shares are strongly undervalued today.
  • In the medium term, Teranga share prices should be supported by the company's largest shareholder; since November 2017, this shareholder has purchased 2.05 million shares and is still buying.
  • What is more, despite these positives, Teranga shares are the cheapest stocks among its African peers.

Most recently, I have constructed an index replicating the share price action of a few precious metals mining companies operating only in Africa. The index is comprised of the following plays: Teranga Gold (OTCQX:TGCDF), Roxgold (OTCQX:ROGFF), Randgold (GOLD), Endeavour Mining (OTCQX:EDVMF), Semafo (OTCPK:SEMFF), Perseus (OTCPK:PMNXF) and Golden Star (GSS). Interestingly, shares of these companies are in fashion once again:

(Source: Simple Digressions)

The chart above compares the Africa index to the VanEck Vectors Gold Miners ETF (GDX), a popular ETF representing a number of gold miners stocks. Note that after a period of outperformance (January 2016 - December 2016; the blue arrow), between December 2016 and June 2017, the African miners were out of fashion (the red arrow). Then, since the end of 2017, these shares have been attractive once again (the blue arrow on the right).

Investment thesis

Not many mining companies are able to pass a valuation test based on a discounted cash flow model. Due to relatively high gold prices, precious metals miners’ market values are well above their intrinsic values (calculated using the discounted cash flow models). However, Teranga Gold, a mid-cap African mining company, passes such a test. According to my own calculations, one share of Teranga is worth $5.65. This value was calculated using a discounted cash flow model applied to two projects owned by the company: the Sabodala mine and the Wahgnion development project.

What is more, in my opinion, there is a medium-term catalyst that can drive Teranga’s share prices up. In November 2017, the company’s largest shareholder announced his intention to purchase up to 5% of Teranga shares. Since that time, this shareholder has purchased as many as 2.05 million shares, and a possible result of his activity is shown here:

(Source: Simple Digressions)

As the chart shows, since the end of

Did you like this article? If yes, please, visit my Unorthodox Mining Investing section, where I manage a portfolio of up-to-ten mining picks, discuss new investment ideas and provide my subscribers with a medium-term outlook on a few financial markets (particularly the base / precious metals market). Most recently, I have introduced a new section called “Developers”. This service is dedicated to mining companies planning to open new mines within one or two years.

This article was written by

Simple Digressions profile picture
An unorthodox approach to the mining sector, precious and base metals

An independent analyst and private investor. Professional experience comprises about 20 years in a number of financial and industrial companies. Fan of the Austrian School of Economics.

Analyst’s Disclosure: I am/we are long GDX, CEF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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