Dacian Gold Ltd (ASX: DCN)
First gold poured at 100%?owned Mt Morgans Gold Project: Dacian Gold Ltd.’s (ASX: DCN) stock saw some upside in early April 2018 after the company’s first bar of gold was poured at its 100%?owned Mt Morgans Gold Project (high-margin gold project in the Laverton goldfield in WA) on March 29, 2018. This was achieved at the back of the timely completion of the construction of new A$200m gold mine and efforts made on budget. DCN’s production ramp?up is underway and the company is targeting 180,000?210,000oz in FY2019. Further, the company expects 30,000?40,000oz of production for FY2018 (June quarter 2018). At the end of the March quarter 2018, the estimated overall liquidity available to DCN has been indicated to be approximately A$50 million, including A$40 million in cash and A$10 million available from its debt facility. Additionally, the Mineral Resource and Ore Reserve updates are in progress, including the maiden Ore Reserve for Cameron Well.
Efforts to generate cash: The group is envisaging a conservative 6-9 months’ ramp up, and mine transitioning from cash spending phase to cash generation phase through CY 2018 ramp up. All cost is to be capitalized during the ramp up ahead of declaring commercial production. Cash liquidity at A$50 million ($40 M in cash and $10 M in debt) with 45 Koz hedged at company discretion, was reported. A major new discovery close to the plant located just 9 Km North West of the new treatment plant has been another highlight and extensive 6 km oxide gold anomaly has been defined by 1594 shallow air core drill holes. DCN has an excellent exploration upside with the asset having over 10 years of mine life, and A$ gold prices over A$1700/oz will help the group generate strong free cashflows. The group can also provide a growth opportunity in terms of M&A in the Australian gold sector, given the high-quality asset. DCN stock has fallen 4% in last five days with a six months’ rise of 38.4%, as on April 17, 2018; and we have a “Hold” recommendation on the stock at the current price of $ 2.870.
Key highlights:
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First Gold bar poured on March 29, 2018
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$200 M development completed on time and on budget
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New underground and open pit mines feeding new 2.5Mtpa Plant
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Production of 30-40 Koz for FY 2018 to ramp up to 180-210 Koz for FY 2019
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3.3 Moz Resource initial 1.02 Moz Ore Reserve
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Initial 8-year life with forecast of A$ 1039/Oz
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Exceptional organic growth potential with drilling underway on several fronts to grow mineral reserves and ore reserves
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