Dacian Gold Limited

DCN Details

Q1FY22 Operational Activities: Dacian Gold Limited (ASX: DCN) is a mid-tier gold producer. It undertakes gold production at the Mt Morgans Gold Operations (MMGO) and has multiple exploration targets including Phoenix Ridge, Transvaal, Craic, and Western Deposit.

• Operations Update: Investments spend on development capital stood at $18.5 million on Doublejay pre-stripping and Redcliffe project. Exploration spent stood around $5.1 million. Production for the quarter clocked 15,819 ounces gold at AUSC of $2,362 per ounce, bordered in line with H2FY22 guidance.
• Financial Position: Cash and gold in hand as of 30 September 2021 stood at $33.2 million. Total debt clocked $16.0 million after refinancing of credit facility. Total forward hedge position has shrunk to 13,410 ounces at an average gold price of $2,236 per ounce.
• Growth and Exploration: The drilling below Jupitar open pits illustrates grade and size potential of 102.9 meters at 1.4g/t Au from 436.3 meters intersected below Heffernans and 44.5 meters at 1.1g/t Au from 247.1 meters interacted below Ganymede. Aggregate exploration and growth drilling of 19,000 meters was completed.

Operating Metrics, Analysis by Kalkine Group

Key Risks and Challenges

The materials and mining industry is critically facing labor shortages which has hurdled the day-to-day exploration activities. The interstate travel ban has affected the labor mobility and activity of workforce underground.

Outlook

FY22 production guidance stands in the range of 100k and 110k ounces at AISC in range of $1,550 and $1,700 per ounce. Quarterly production is estimated to surge for rest of FY22 as underground mines commenced stope production and open pit strip ratio reduced.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

The stock of DCN gave a negative return of ~61.905% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.155 - $0.565. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). The company might trade at a slight premium to its peers, considering prudent financial position after equity raise and favourable exploration activities. For valuation, few peers like Regis Resources Ltd (ASX: RRL), Perenti Global Ltd (ASX: PRN), Jervois Global Ltd (ASX: JRV) and others have been considered. Considering the shredded financial leverage, improved potential from Jupiter open pit, production in line with guidance, and upside indicated by valuation, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.200, up by ~2.564%, as of 07 January 2022.

DCN Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: - 

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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