There are not many junior mining companies that make it to the ‘end game’ but when you have gold mining veterans holding the lions share of the company and a committed management team, Goldstone is one of them!
If you have followed my blogs and had a gander at my research notes you’ll see that Goldstone Resources is one of my main investments. In fact I first covered the company when the shares were trading at 2.9p
Goldstone are developing their AK-HM (Akrokeri & Homase) gold projects in the highly prospective Ashanti gold gold belt in Ghana.
I’ve produced a video that brings you up to speed on the projects so I’m not going to regurgitate that here but rather focus on the latest news from the company and what it means for existing and new shareholders.
Here is the video
So back to the news…
In the companies operational update they announced two things. Firstly an extension to the gold loan that was provided by AIMS who are actually one of the largest shareholders.
The gold loan has been extended a few times as the company have had to grapple with the effects of covid and waiting upon permits which have delayed intended first gold pour.
Thankfully, AIMS as a key shareholder and who have seen the companies progress over a difficult year have extended the gold loan repayment schedule and remain fully supportive something personally I’ve not had any doubt about. Whilst we are on that subject the gold loan is $3m which for a company about to enter first production probably makes them one of the lowest geared gold producers you are going to find given this year they have built a mine and started mining operations.
So secondly and most importantly the company have announced that in just six weeks they have constructed and commissioned their own elution facility including smelter that will enable them to produce gold in just a matter of weeks following final hot commissioning!
This is truly a pivotal moment for the company and of course shareholders who thought just a few weeks back the delay to gold pour could be longer given they couldn’t use an intended third-party gold room.
But as I said, with the likes of MAED represented on the board, the company have built an elution facility in record time and following final testing are set to pour first gold.
If you check out my recent blogs you’ll see I’ve put a lot of emphasis on the shareholder register the likes of BCM and Paracale who between them have brought numerous mines into production not to mention CEO Emma Priestley who I have spoken to a few times this year and has been at the helm on site in Ghana to oversee operations – all in all a great team effort!
The end game…
So through 2021 (as you can see from the https://twitter.com/GoldstoneRes twitter feed) the company have built a mine, commenced mining operations, built an elution facility and are now on the cusp of first gold pour. An amazing achievement!
The recent SP Angel broker note nicely projects the numbers – I’ll just leave them here…
We can probably ignore most of the 2021 numbers given delays but we are looking at some interesting projections for 2022 onwards to the tune of $80m+ EBITDA and $50m+ in FCF for today a sub £60m market cap company that has additional Homase pits, exploration upside and the Akrokeri mine that sports a head grade of 21g/t with up to 51g/t sections!
The Opportunity…
Many market commentators are predicting higher gold with some predictions as high as $4000/oz as inflation bites. This of course would be fantastic for Goldstone but as the broker projections show, Goldstone’s AISC is as low as $651/oz the company is still highly profitable at much lower gold prices than that of today!
As previously mentioned with around just £4m of debt in total and a functional gold mine the company are going to be in a position to clear that debt quickly, expand and develop the mine further and organically from FCF and start perhaps paying a dividend in the not too distant future!
The company will be producing an updated production schedule to be released shortly and intend to provide an updated Phase 1 DEP and updated JORC resource following their 247% resource increase this year.
Aside of that, the company have also announced plans for further drilling and development of Akrokeri – their second 100% owned high-grade under ground mine.
Investors have a lot to look forward to but perhaps most importantly the company being at a value inflection point where first cash flow creates independence and growth opportunities that should feed back into the company valuation and share price (the bit we are all here for!)
This can be the sweet-spot for investors as per the example I like to use in my video where another PGM company Sylvania Platinum experienced over 5 years a 23x uplift in share price from 6p-137p on transitioning to production and cash flow generation.
i’ll be watching keenly as the company progress both projects and of course blog on further developments!
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Disclaimer
Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.
