Is This One of Africa's Most Attractive Gold Companies?

Source: Streetwise Reports 10/07/2024

This owner of a fully permitted gold project in Côte d’Ivoire is working to grow its resource and preparing to start building a mine. Learn why a handful of experts like both company and project.

Montage Gold Corp. (MAU:TSX.V), a mining exploration and development company headquartered in Vancouver, British Columbia, is advancing its 100%-owned, preconstruction-stage Koné gold project in West Africa’s Côte d’Ivoire.

“The attractiveness of the project is the large scale, potential for additional higher-grade resources, simple flowsheet design with relatively low processing costs and access to key infrastructure,” BMO Capital Markets Analyst Raj Ray wrote in an Aug. 15 initiation report.

Koné’s current resource, encompassing the two main deposits, Koné and Gbongogo Main, is 4,900,000 ounces of gold (4.9 Moz of Au) in the Indicated category and 0.4 Moz of Au in the Inferred category.

A feasibility study (FS) of Koné, updated earlier this year, outlines an open-pit mining operation producing an annual average of 223,000 ounces (223 Koz) of Au over a 16-year mine life, starting with 300 Koz per year production during the first eight years, at an all-in sustaining cost of US$998 per ounce (US$998/oz). Plant throughput is estimated at 11,000,000 tons per annum, and gold recovery is expected to be 89%.

Analysts’ Insights and Opinions

Ray and several analysts are bullish on Montage and in their recent respective reports, highlighted its compelling aspects.

Ventum Capital Markets Analyst Alex Terentiew, who launched research coverage on Montage on Sept. 27, pointed out in his initiation report the size and prospectivity of the company’s property, the caliber of its management team, and its financial backing.

Montage’s share price at the time of the report, he wrote, was “an attractive entry point to gain ownership of one of Africa’s most attractive gold companies.”

Montage’s land package, spanning 2,259 square kilometers, is one the largest in West Africa. It encompasses seven known shear zones, all proven to host gold mineralization. There, the company already identified 35 drill targets.

Terentiew described Montage’s team as “strong and capable,” noting their extensive experience in exploring, permitting, building, and operating projects and mines in West Africa. Montage’s largest shareholders are strategic investors: The Lundin Group, owning a 19.9% stake, and Zijin Mining Group Co. Ltd., with 9.9%. Directors and officers hold 5.2% of Montage.

The analyst wrote about the company, “We are optimistic about Montage’s ability to extract value for all stakeholders from the Koné gold project while potentially expanding into a multiasset West African producer through accretive mergers and acquisitions.”

Montage’s share price at the time of the report, he wrote, was “an attractive entry point to gain ownership of one of Africa’s most attractive gold companies.”

Terentiew has a Buy rating and a target price now reflecting 31% upside, on Montage.

Beacon Securities Analyst Bereket Berhe described Montage in an Aug. 15 research note as “cashed up, permitted, and ready to roll” at Koné. Recently, the company raised CA$180 million (CA$180M) in a private placement and received the last of the permits required to proceed with construction, both de-risking events.

BMO’s Ray purported that Koné could be “one of the next big gold mines in West Africa that has the scale to grow.”

Berhe is impressed with the work Montage has done to date at Koné, which highlights its “focus and potential to unlock value through exploration,” he wrote. “Overall, the results provide confidence and confirm the prospectivity of the Koné area.”

At the time of Berhe’s report, the company was nearly done with its US$6M, 30,000-meter (30,000m) program of mixed diamond, reverse circulation, air core, and auger drilling at Koné, in which it was testing 15 out of the previously identified 35 targets. Montage has since finished this campaign and plans to drill another 60,000m to test additional top-priority targets.

On the news of the equity raise and receipt of permits, BMO increased its target price by 10%, such that it now implies a 44% return. Berhe wrote that the share price at the time was a good entry point and that Montage is a Buy.

BMO’s Ray purported that Koné could be “one of the next big gold mines in West Africa that has the scale to grow.”

Another positive feature, he wrote, is its low-cost nature, putting Koné among the lowest-cost African producers with respect to overall processing costs.

Further, added Ray, Koné’s economics, as estimated in the updated FS, are attractive and potentially could be even better. Based on the FS, the project has a US$1,089M after-tax net present value discounted at 5% and a 31% internal rate of return. Feed optimization and inclusion of high-grade satellite deposits into the mine plan would improve the economics.

Montage is now trading at a discount to developer peers on an enterprise value:ounce basis, but “as the company derisks, we believe the discount will continue to narrow,” wrote Ray.

His rating on Montage is Buy, and his target price reflected a 31% uplift from the current share price.

National Bank of Canada Analyst Don DeMarco likes Montage for Koné’s location, for one, he wrote in an Aug. 23 report. More than one-third of the gold-rich Birimian greenstone belt extending from Ghana to Senegal is within Côte d’Ivoire, thereby increasing exploration potential at the project and regionally, he explained. Côte d’Ivoire is among The Fraser Institute’s Top 5 African locales for overall investment attractiveness.

The “new Lundin-backed management team will build [the] Koné mine and build a significant African producer,” The Daily Gold Premium Editor Jordan Roy-Byrne wrote.

Montage is upside-focused, DeMarco noted and alluded to it being a potential takeout target. He wrote, “Resource conversion and accretion opportunities show potential to lift and extend the roughly +300 Koz per year, a wheelhouse of interest among senior producers.”

The analyst expects that Montage will rerate as it continues derisking Koné. For now, he has an Outperform on it and a price target indicating a return potential of 31%.

The Daily Gold Premium Editor Jordan Roy-Byrne has Montage among his Top 10 gold companies and in his Model Portfolio, as noted in the newsletter’s Sept. 29 issue. His rating on the stock is Hold.

The “new Lundin-backed management team will build [the] Koné mine and build a significant African producer,” he wrote.

Gold Poised To Be “Clear Winner”

The gold sector continues to impress, and according to experts, the outlook is favorable.

“Gold is setting records,” according to a Sept. 24 Seeking Alpha article. “It is outperforming stocks. And pretty much everything else.”

Year to date, gold up is 27.1%. In comparison, the return with the Standard & Poor’s 500 is 20.8% during the same period. Also, the NASDAQ is up 21.7%, and the Dow is 11.6%. Gold has even exceeded its 25% gain during the COVID-19 pandemic. As it stands now, it is on track this year for its best return since 2010, and “this gold bull still has plenty of legs.”

Driving the demand are U.S. Federal Reserve policy, high interest for gold in Asian and Middle Eastern markets, de-dollarization and central bank buying of the metal, the article noted.

Based on its charts, gold is about to “go into vertical melt-up mode” once it breaks above roughly US$2,800/oz, Technical Analyst Clive Maund wrote in a Sept. 26 report. He indicated the ascent will likely start “as a steep but fairly orderly uptrend that accelerates in stages over time until it ends up in a wild speculative melee with the price going ‘limit up’ successively or equivalent, as much as market conditions and rules at the time permit.”

Therefore, he added, “the gains in all gold-related investments at this time should be spectacular.”

Gold equities specifically offer an “incredible opportunity” currently, wrote U.S. Global Investors’ Frank Holmes in a Sept. 26 Investing.com article, because they are not trading at levels reflecting the continuing rise of the yellow metal’s price.

“And since gold mining stocks have typically moved out of lockstep with the broader market,” he added, “they offer a level of diversification that I believe can help hedge portfolios against market downturns.”

Major, midtier and junior mining companies “all look ripe for a rebound in what is increasingly a risk-tolerant environment now that ‘the punch bowl’ of monetary easing/lower interest rates is back on central banks’ agendas,” Ahead of the Herd’s Richard Mills pointed out in the Sept. 28 issue. Yet, of the three stages of companies, juniors offer the greatest leverage to increasing commodity prices and the highest potential return, he noted.

“Investing early in the development cycle of the right gold junior, one that has an excellent project in a safe jurisdiction, led by experienced management with the ability to raise money, can reap huge rewards—five, 10, even 20 times your money isn’t uncommon,” wrote Mills.

Brien Lundin of Gold Newsletter likewise touted these particular stocks in an Oct. 2 article.

“From a fundamental standpoint, everything seems to be turning in favor of gold,” he wrote. “We’re in a long-term, secular bull market. And we need to be positioned for it. One of the best ways, of course, is through high-quality junior mining equities.”

Looking ahead at the gold price, Goldman Sachs now forecasts it to be US$2,900/oz in early 2025, having recently raised it from US$2,700/oz, reported Mint in a Sept. 30 article. Reasons the bank analysts gave were slowly rising exchange-traded funds flows with interest rate cuts in the West and in China, along with increased central bank buying.

Throughout 2025, other experts estimate the gold price will range from US$2,800–3,200/oz, according to a Sept. 25 Skilling article. Longer term, analysts predict it could reach US$6,800/oz by 2040, representing a 7.2% annual rate of return. Central bank policies, global economic trends, and inflation will continue to influence the price.

“The clear winner over the next year or so is likely to be gold,” wrote Adrian Day of Adrian Day Asset Management in his Q3 Portfolio Review. “Both sentiment and the macro environment are turning in gold’s favor, with much more to come.”

The Catalysts: Project Milestones

Montage has multiple events on the horizon that could boost its share price. Further results of drilling at and around Koné are expected at least through the end of 2024, with a resource update to follow, noted Terentiew.

The company is in the process of putting together a financing package to fund construction at Koné and is expected to have this finalized by year-end, wrote DeMarco on Aug. 23. This will further derisk the project.

“We expect additional funding of US$675M via a combination of debt and equity over H2/24, ahead of construction commencement,” DeMarco wrote Aug. 23

Future costs for which additional capital is needed, as estimated by the National Bank of Canada, total about US$827M. A major portion, US$800M, is for project development capex. The other US$27M is for exploration and general and administrative expenses between Q1/25 through Q1/27. [OWNERSHIP_CHART-11017]

Montage is expected to subsequently make a construction decision. Were it to decide to move forward, construction could start in Q1/25, estimated DeMarco, and take about 27 months to complete. Following that, in roughly Q2/27, the first gold pour would occur, followed by the commencement of commercial production about one quarter later.

Ownership and Share Structure

According to Refinitiv, 5.69% of Montage Gold is owned by management and insiders, with 19.61 million shares.

28.76% is with strategic investors, with 102.53 million shares

As for institutional ownership, 12 companies hold 4.99% or 17.18 million shares.

Retail investors own the remaining 60.65% of Montage.

The company has 344.58M outstanding shares and 222.44M free float traded shares.

Its market cap is CA$487.48. Its 52-week range is CA$0.51−$2.03 per share.

Sign up for our FREE newsletter at: www.streetwisereports.com/get-news

Important Disclosures:

1. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
2. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

For additional disclosures, please click here.

( Companies Mentioned: MAU:TSX.V, )

Source: https://www.streetwisereports.com/article/2024/10/07/is-this-one-of-africas-most-attractive-gold-co-s.html