Note: Galiano Gold (NYSE:GAU) currently operates and manages the Asanko gold mine or AGM, located in Ghana, West Africa, jointly owned with Gold Fields (GFI). Also, Galiano Gold owns the Asumura project indicated below.
Note: Galiano is the joint venture operator and currently receives an annual service fee from the JV of $7.1 million. Gold Fields Limited owns a 45% equity interest in the AGM JV, with the Government of Ghana owning a 10% free‐carried interest.
Note: I have followed GAU quarterly since 2021. This new article is a quarterly update of my article published on June 17, 2022.
On November 9, 2022, Galiano Gold reported financial results for the third quarter of 2022.
Galiano Gold reported that gold production at the Asanko gold mine in Ghana ("AGM") was 43,899 ounces during 3Q22, down 11.4% from 49,543 ounces produced in 3Q21. The Year‐to‐date production of 136,252 ounces encouraged the company to further upward guidance to 160K to 170K ounces for 2022.
Following continued outperformance of stockpile grades processed and recoveries achieved, production guidance is again being revised upwards to between 160,000 to 170,000 ounces of gold production in 2022 (originally 100,000 to 120,000 ounces and revised upwards to 140,000 to 160,000 ounces in Q2 2022).
At prevailing gold prices as of Q3 2022 and the midpoint of 2022 further revised production guidance (165,000oz), management expects the AGM to generate positive operating cash flows of approximately $90 million (previously $60 million) in 2022. From Press release.
Total cash costs per ounce were $1,001, and all-in-sustaining costs ("AISC") were $1,178/oz during the quarter.
The company reported a net income of $1.28 million during the quarter.
Galiano Gold has significantly underperformed the VanEck Gold Miners ETF (GDX) and is now down 28% on a one-year basis.
I believe the sole interest here is to use GAU as a trading tool.
On the positive side, the company revised its 2022 gold production and significantly reduced the quarterly AISC in 3Q22 despite inflationary pressures.
Also, insiders, notably the independent chairman Paul Wright, are buying GAU regularly, which is an encouraging sign.
Thus, I recommend trading LIFO for about 60% of your overall position but keeping a small long-term position for a future acquisition offer in an all-share deal in 2023.
Note: The Joint Venture is split 50/50 for the 90% economic interest, with Ghana Government holding 10%. Therefore, Galiano Gold owns 45% of the Joint Venture.
|Total Revenues $ million (100% basis)||95.20||85.28||91.08||75.53||84.89||76.91|
|Quarterly Earnings in $ million||5.00||4.12||-91.03||-1.54||12.57||1.28|
|EBITDA $ million||5.06||4.17||-91.01||-1.49||12.61||1.32|
|EPS (diluted) $ per share||0.02||0.02||-0.41||-0.01||0.06||0.01|
|Operating Cash Flow $ million||-3.13||-2.84||-2.29||-3.17||2.57||1.54|
|CapEx in $ million||0.00||0.00||0.03||0.00||0.00||0.00|
|Free Cash Flow in $ million||-3.14||-2.84||-2.30||-3.17||2.57||1.54|
|Total cash in $ million (100% basis)||58.55||55.84||53.52||50.38||53.01||54.72|
|Total LT Debt (incl. current) in $ million||0.00||0.00||0.00||0.00||0.00||0.00|
|Shares Outstanding (diluted) in millions||225.29||225.07||224.95||224.94||224.94||224.94|
Source: Company release M&A. Fun Trading files.
* Indicated by the company
Free cash flow is cash flow from operations minus CapEx. Trailing 12-month (TTM) free cash flow was a loss of $1.36 million, with a gain of $1.54 million in 3Q22.
Galiano Gold reported that gold production at the Asanko gold mine in Ghana was 43,899 ounces during 3Q22 and sold 45,482 ounces. The processing plant achieved a milling throughput of 1.4 Mt of ore at a grade of 1.1g/t and metallurgical recovery averaging 88%. The AGM continued to achieve a significant improvement in recoveries from 1Q22.
During Q3 2022, the AGM processed 1.3 Mt of stockpiled material to supplement mill feed from the Akwasiso pit. Processing cost per tonne for Q3 2022 was $10.45 compared to $9.68 during 3Q21, an increase of 8%.
Mineral resource measured and indicated is now 2.904 Moz.
Galiano Gold expects to update the Life of Mine Plan (LOM), Mineral Resource, and Mineral Reserves Technical work in 1Q23.
The company is advancing exploration:
GAU forms an ascending triangle pattern with resistance at $0.60 and support at $0.50. Ascending channel patterns are short-term bullish moving higher within an ascending channel, but these patterns often form within longer-term downtrends as continuation patterns.
The trading strategy is to sell partially between $0.595 and $0.61 with possible upper resistance at $0.62 and buy/accumulate between $0.514 and $0.497 with possible lower support at $0.47, whichever comes first.
Gold may turn bearish if the Fed hikes 75 points on December 14. In this case, GAU may drop as low as $0.47. We still await a 50 or 75 points hike in December and many more hikes in 2023 to fight rampant inflation.
Thus, I recommend trading LIFO for about 60% of your total position and keeping a tiny core long position for a test of $1-$1.50.
Watch the gold price like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
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This article was written by
I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.
I live mostly in Sweden with my loving wife.
I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.
“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.
Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.
Disclosure: I/we have a beneficial long position in the shares of GAU either through stock ownership, options, or other derivatives. 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 trade short-term GAU but keep a small long-term position, as explained in my article.