GoGold Offers Plenty Of Upside Based On My Updated Valuation

Oct. 14, 2019 12:58 PM ETGoGold Resources Inc. (GLGDF), GGD:CA23 Comments

Summary

  • New record production of 580,711 silver equivalent ounces in the most recent quarter.
  • Los Ricos continues to produce good exploration results as GoGold is expanding the drill area.
  • I still see a lot of upside in GoGold despite more than a 200% increase in the stock price from the bottom late last year.

Investment Thesis

I have written several articles about GoGold (OTCQX:GLGDF) recently, but it has been a while since I provided an updated valuation which highlights that the good exploration results at Los Ricos are not yet priced into the stock, despite the stock price increase from the bottom late last year.

This article covers an updated Net Asset Valuation of Parral. I will look at other balance sheet items and the costs associated with the acquisition of Los Ricos. Finally, I will look at the latest exploration results from the company.

ChartData by YCharts

Figure 1 - Source: YCharts

Parral

Parral has recovered well from the drop in production we saw during last year and has had record quarter after record quarter recently. The most recent quarter produced 580,711 silver equivalent ounces. Costs for the quarter will not be available until the annual report is released in the second half of December based on previous year's release date.

Figure 2 - Source: Quarterly Reports

Stacking should in the most recent quarter be more aligned with production, which will hopefully see costs go down some. The main reduction in cost is expected in Q2 2020 when the SART plant will be in place. Construction is on schedule and due to be completed by the end of the calendar year.

Figure 3 - Source: Quarterly Reports

I have earlier estimated that adjusted AISC to come down to $11/oz, but I will use a slightly more conservative cost estimate for the below valuation with adjusted cash cost at $9/oz which GoGold was well below in Q4-18.

The below table reflects all the inputs into the valuation and a few of them require some further comments.

Figure 4 - Source: Estimates

All numbers are discounted by 6.73% which reflects a 5% risk premia over the current

This article was written by

Bang For The Buck profile picture
3.39K Followers
A cyclical value approach, presently focused on natural resources

I enjoy my anonymity, where I write under the name Bang For The Buck. I hold a BSc and MSc in Financial Economics, but most of my value-based investment knowledge comes from independent learning where I am a perpetual student. I primarily focus on turnaround stories, with attractive valuations, in cyclical industries. I have a significant portion of my portfolio exposed to the precious metals industry due to current monetary and fiscal policies.

I publish regular articles on Seeking Alpha and offer a Marketplace service called Off The Beaten Path where subscribers receives real-time updates on the portfolio, in-depth portfolio reports, and frequent updates on holdings companies. As the name suggest, I primarily invest in industries and companies that are underappreciated, which I have found provides more attractive returns.

I am always happy to respond to comments and questions in my articles during the first few days. More in-depth and ongoing discussions are had inside Off The Beaten Path.

Disclosure: I am/we are long GLGDF. 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.

Additional disclosure: I am long GoGold (GGD) on TSX.

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