Canadian Gold Miner Announces Q2/24 Results

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Soma Gold Corp. (TSXV:SOMA; OTC:SMAGF; WKN:A2P4DU) announced its Q2/24 and H1/24 results, and they reflect the impacts of the El Bagre mill closure and the ongoing transition to conventional mining methods at Cordero, noted a news release.

"This transition is largely complete, and we anticipate mining the higher-grade zones in Upper Cordero, [commencing] by Q3/24E," President and Chief Executive Officer (CEO) Geoff Hampson said in the release. Cordero is Soma's producing mine, part of its El Bagre Gold Mining Complex in Colombia.

As for the El Bagre mill, Soma finished maintenance on it, including a rebuild of the ball mill, during the eight-day shutdown in June.

As for the two sets of financial results, Q2/24 revenue was CA$22.7 million (CA$22.7M), down slightly year over year (YOY) from CA$23M. However, H1/24 revenue was CA$42M, up YOY from CA$39M. H1/24 income from mining operations was CA$10M, down YOY from CA$16M.

Adjusted EBITDA in Q2/24 was CA$7.6M or CA$0.08 per share (CA$0.08/share) compared to CA$10.3M or CA$0.11/share YOY. In H1/24, it was CA$13.9M or CA$0.15/share compared to CA$17M or CA$0.19/share YOY.

The average realized cash margin was US$1,029 in Q2/24, down YOY from US$1,050. In H1/24, it was US$959, up YOY from US$1,021.

In terms of operations, the El Bagre mill closure for maintenance led to a significant decrease in gold and silver ounces produced in June and, thus, in Q2/24 and H1/24, the release indicated. Gold and silver production and sales numbers for Q2/24 and H1/24 both were down YOY.

As for gold, production in Q2/24 was 6,513 ounces (oz) versus 8,798, and in H1/24, 13,776 oz versus 15,526. Gold sales in Q2/24 were 7,131 oz versus 8,844, and in H1/24, 14,084 oz versus 15,221.

As for silver and its YOY comparisons, in Q2/24, production was 8,737 oz versus 11,421, and in H1/24, 17,626 oz versus 19,409. Silver sales in Q2/24 were 8,737 oz versus 11,421 and in H1/24, 17,626 oz versus 19,746.

Total cash costs per ounce of gold sold in Q2/24 were US$1,340, up YOY from US$907. In H1/24, they were US$1,263, up YOY from US$901.

Also affecting the numbers in Q2/24, according to the release, a higher proportion of development costs were expensed rather than capitalized due to Soma's shift to conventional mining methods. During the quarter, an additional CA$1.1M in expenditures were charged directly to the cost of sales compared to the average of the previous three quarters.

In Q2/24, the continuing transition to conventional increased mining costs per ounce because Soma was mining zones containing a series of faults and dykes and having grades lower than the historical average.

"We expect the combination of higher grades, reduced development and waste rock, and an increase in the number of stopes, which will all contribute to a strong finish for the year," Hampson said in the release.

All told, Soma Gold posted an H2/24 net loss of CA$0.6M, or CA$0.01/share.

Gold Mining, Exploration in Colombia

Headquartered in British Columbia, Soma Gold Corp. is a gold producer with 41,000 hectares of mineral rights concessions extending 100-plus kilometers (100-plus km) along Colombia's prolific Otú fault, according to the August Corporate Presentation. The property is on trend with the 5,500,000 ounce (5.5 Moz) Segovia underground gold mine and the 6 Moz Gramalote gold deposit.

The company's assets include the producing Cordero mine, the operating El Bagre mill, the currently non-operating El Limon mill and the Nechi and Machuca deposits. The total resource stands at 526,000 ounces of gold (526 Koz of Au).

"In short, we are looking at a perfect storm that will lead to gold doing a 'moonshot,'" Technical Analyst Clive Maund wrote.

Soma is ramping up production at Cordero to 500 Koz of Au in the near term and current output at the El Bagre mill to 500–550 tons per day (tpd), up from 450 tpd, by Q4/24.

The mill is permitted for expansion to 1,000 tpd. Meanwhile, the company is working toward expanding Cordero's existing resource of 260 Koz of Au through exploration, in-fill, and deposit extension drilling. The vein system remains open at depth at on strike.

The Nechi deposit, 25 km north of the El Bagre Gold Complex, features the same types of host rock as the nearby Segovia mine. Some mine development has been done, and 42,000 meters of drilling have been completed at Nechi, which has an existing 128 Koz resource.

The Machuca deposit, 10 km south of the El Limon mill, is associated with many adjacent parallel and perpendicular veins. Grades there, returned on channel sampling and drilling, exceed 25 grams per ton gold. The El Limon mill, now on care and maintenance but slated for being brought online soon, has a 225 tpd capacity and is permitted for 400 tpd.

Gold Expected To Soar

The yellow metal is on a tear, according to experts.

"Gold exploded out of its 13-year cup and handle pattern through US$2,100/oz, and soon after, silver broke out of a three to four-year range past US$26/oz," wrote Jordan Roy-Byrne in The Daily Gold on August 23.

According to Technical Analyst Clive Maund, gold's emphatic breakout in April kicked off what is expected to be the metal's "most spectacular bull market to date," marked by an "enormous" ascent. The rise, already underway with the gold price hitting new highs, is still in the early stages.

"In short, we are looking at a perfect storm that will lead to gold doing a 'moonshot,'" Maund wrote in an August 19 report. "Investors can, therefore, buy gold and most gold-related investments with confidence."

Soma is undervalued compared to other small and midtier producers, Hallgarten & Co. said.

Regarding gold stocks, they are expected to have impressive uplegs, too, Roy-Byrne highlighted, given the current bullish alignment of the technicals, fundamentals and sentiment (still negative).

"Gold looks to continue to trend higher to its cup and handle measured upside target of US$3,000/oz," he wrote. "Meanwhile, miners and juniors are in a prime position to leverage this move. There is still plenty of value and upside potential in high-quality juniors. Now is the time to act because it might be too late in the fall."

With respect to gold mining, the global market is expected to grow to US$274.2 billion (US$274.2B) in value by 2032 from US$201.2B in 2032, according to Market Research Future. The forecasted compound annual growth rate between this period is 3.5%.

Significant drivers of this projected growth overall, the market analysis company noted, are the increasing population of high net worth individuals and a growing demand for gold jewelry, including among men.

The Catalysts: Progress on Robust Work Plan

Soma's overarching long-term goals, outlined in its corporate presentation, are to increase its global resource, expand its milling capacity, increase its production, and ultimately return capital to shareholders.

Specific goals for several of the company's assets are as follows:

At Cordero, additional results are expected from the 2024 diamond drill program. Soma plans to start mining in the high-grade zone of Upper Cordero this quarter, ramp up production, continue expanding the resource, and, in Q1/25, update the resource estimate. The future production target for Cordero is 85 Koz of Au per year by 2028.

Regarding Machuca, the company intends to start the mine in Q4/24. During this fourth quarter, Soma will drill several high-priority targets near the Machuca mine, as results of exploration work show the potential for the deposit to be larger and of higher grade, the company said.

"We are optimistic that these discoveries can potentially lead to an increase in mineable resources, enhancing the feed for our two mills and possibly justifying the fully permitted mill expansion," Hampson said in the release.

With respect to Nechi, plans are to expand the resource there to 250 Koz Au from 128 Koz Au, finalize the mine plan in preparation for the start of mining by 2026. The permit to allow mining at Nechi is expected in H2/24.

As for the El Limon mill, Soma plans to restart it in Q4/24.

93% Return Potential

Soma is one of the companies in Hallgarten & Co.'s Resources Portfolio. According to the investment bank's July 2024 performance review, it has a 12-month price target on the gold producer that implies 93% upside from where the stock is now trading.

Soma is undervalued compared to other small and midtier producers, the company said.

Ownership and Share Structure

Headquartered in Vancouver, B.C., Soma Gold Corp. has a market cap of US$40.19 million and trades in a 52-week range of CA$0.30 and CA$0.74. As of December  31, 2023, it had CA$1.8 million in the bank, with a monthly exploration budget of CA$330,000.

As a profitable company, it has no burn rate.

According to Reuters, 67.45% of the company is held by management and insiders.

CEO and Chairman Geoffrey Hampson has 17.17% and 0.56% through his wholly owned companies Hampson Equities Ltd. and Lake Forest Development Corp., Vice President Jean-Francois Meilleur has 0.52%, Director Glenn Walsh has 0.31% directly and 44.07% through his wholly owned company, Conex Services Inc., and CFO Greg Hayes has 0.12%.

A further 0.70% of control is vested in institutions.

Palos Management Inc. has a 0.27% stake, and Marmite Capital AG has one comprising 0.33%. Strategic investor Eric Sprott owns 750,000 shares bought in a private placement (0.82%).

2.26% is with strategic investors.

The rest is with retail investors.