In today’s daily we have covered the upcoming
Alacer Gold (BUY).
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APPLE Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by 19.7 points or 0.36%on Monday and closed at 5506.9 points.
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Woolworths Daily Chart (Source – Thomson Reuters)
Top Performers on the ASX 200 were :-
Stock of the Day - ALACER GOLD CORP. (BUY)
Alacer Gold Corp. (AQG), the leading intermediate gold mining company and having an 80% interest in the world-class Çöpler Gold Mine in Turkey, is gaining some momentum. AQG announced that Çöpler produced 63,356 ounces in the third quarter 2014, which reflects a 27% increase in production over the second quarter.
The Company has a market cap of ~$625M with cash of $292M as at 30 June 2014. The cash has increased to $320M, which is an increase of $28M for the last quarter. The robust cash position may facilitate AQG pursue organic growth.
The Company ended Q3 2014 with attributable net profit from operations of $14.9M, or $0.05 per share. Adjusted Net Profit was $13.1M, or $0.05 per share. There are about 290M shares on issue and the turnover is ~1.6M shares per day. The Company does not have any external debt.
Financial Position (Source – Company Reports)
As part of the investment highlights, AQG reported to have world?class mine performance with low?cost production and excellent infrastructure. Its heap leach operations are known to steer substantial cash flow. Further, enhancement of the heap leach pad capacity appears to provide more near?team opportunities for the Company. Exploration in highly prospective regions and strategic advantage in Turkey appear to prove fruitful. Specifically, the exploration projects in various joint ventures with Turkish partner Lidya Mining are of interest. AQG also reported investment of about $60 million for optimization and process improvement project.
Çöpler is forecast to produce 160,000 to 180,000 attributable ounces at All-in Costs of $730 to $780 per ounce during 2014. Further, Çöpler’s oxide ore is being processed in a conventional crush, agglomeration, heap-leach and gold recovery circuit.
The Company also reported that its June 2014 Sulfide Definitive Feasibility Study (DFS) has indicated healthy financial returns from processing sulfide ore and extended Çöpler’s mine life to 20 years. July 2014 onwards, Çöpler is forecast to produce a further 3.2 million ounces of gold at low All-in Costs averaging $810 per ounce over the life of the mine, as indicated by AQG.
Corporate Asset Location (Source – Company Reports)
More specifically, Çöpler has continued to perform well with Q2 production of 39,836 attributable ounces at low All?in Costs of $806/ounce. It indicates appropriate progress to meet the 2014 guidance of 160,000 to 180,000 attributable ounces at All?in Costs of $730 to $780 per ounce. Processing improvements are also continuing with commissioning of CIC circuit.
Çöpler Performance (Source – Company Reports)
The delivery on action plan is also looking to be on track as per the Company’s strategy.
Delivery on Action Plan (Source – Company Reports)
A sneak-peak of the near-term oxide opportunities reveals that the Company’s Sulfide project DFS mine plan includes 4.2Mt at 1.2 gpt of heap leachable material classified as waste. With regards to expansion of existingco heap leach pad capacity beyond current 50Mt, AQG’s initial results have illustrated a potential to add ~15?20Mt of additional capacity. In fact, some other heap leach pad locations have also been identified by the Company.
Heap Leach Facility (Source- Company Reports)
The Company believes that Çöpler is capable of helping generate positive cash flow for the next 20 years in view of the robustness of sulfide project. The Brownfield project has already been significantly de-risked. Further, there is a plan in place to further de-risk execution phase. Further, sulfide ounces have provided for 79% of mine life, as reported by AQG.
Çöpler Gold Production (Source – Company Reports)
Overall, the Çöpler sulfide project is generating attractive financial returns with IRR of 20.5% and NPV of $622M, as reported. Further, the on-track progress of the sulfide project appears to be commendable.
Sulfide Project Schedule (Source – Company Reports)
AQG also has leveraged the early-mover advantage in Turkey. In fact, regions such as Tethyan Belt appear to have tremendous mineral potential as identified by the Company. AQG has therefore identified various strong targets in highly prospective Çöpler District.
AQG’s Targets (Source – Company Reports)
With regards to AQG’s Dursunbey Project, a recent discovery in western Turkey, high grade intercepts have been noted. Infill and extensional drilling with 5 rigs is in-progress. The Company has initiated metallurgical work to identify processing options.
Dursunbey Project_ Cross Section L450 NE (Source – Company Reports)
The Company is also making efforts on soft sides such as building community relations with the local community and the Government officials by organizing regular visits as an example.
Overview of Çöpler Mine (Source – Company Reports)
Looking at the operational aspects, the Company mentioned that the resource reconciliation work has significantly upgraded the quality of the reserve. With changes in modeling method, completed exploration database audit, and completed blast hole data audit, a good growth can be seen.
Then processing related initiatives for Çöpler Gold Mine have been completed. Further, the current improvement projects include CIC tanks, SART plant (chemical commissioning completed in August 2014), grasshopper conveyor upgrade phase 2, carbon filter project and new assay laboratory, which are progressing as per the plan. Further improvement projects include HLP Phase 4 which is scheduled to start Q1 2015 with design in progress, counter current leaching (2015) and differential cyanide dosing (2014).
AQG Daily Chart (Source - Thomson Reuters)
The Sulfide ore mine has also continued to provide positive gold reconciliation during Q3 2014 leading to a 29% positive reconciliation on a contained ounce basis as compared to the 2013 resource model.
The Company has further assumed any impact by winter which may slow down the leach kinetics as well as the soft gold production till March quarter 2015, in the guidance.
A few factors which otherwise may be of importance constitute the fluctuations in commodity prices, development-related and operational risks, exchange rate changes, regulatory approvals/ permits, funding related risks, and so forth.
Nonetheless, the overall game show being put up by AQG looks appealing, and thus, we put a
BUY recommendation for this stock at the current price of $1.885.
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