TRX Gold Corp. (TNX:TSX; TRX:NYSE.American) is pursuing low-cost development of its flagship Buckreef gold project in Tanzania, thereby protecting shareholder value, reported ROTH Capital Markets analyst Mike Niehuser in a June 21 research note.
"TRX's approach has built-in development, operational and financial flexibility to manage growth out of cash flow and minimize dilution," Niehuser wrote.
Significant potential gain
As such, ROTH projects a noteworthy gain for investors in TRX, of 122%, noted Niehuser. This is reflected in the gap between ROTH's target price on the gold miner of $1 per share and TRX's current share price of about $0.45.
TRX is a Buy.
Smartly building scale
Niehuser discussed key elements of TRX's low-cost plan for growing Buckreef.
The Canadian company is producing oxidized material on a small scale and paying for it out of cash flow rather than building and using a large plant for processing both oxide and sulfide material.
As for the processing of sulfide ore, recently produced high recoveries on testing bode well for TRX employing a low-cost approach in the future. Recently, the mining company processed a 6,500 ton bulk sample of sulfide ore from Buckreef at its existing mill and recovered 88.7% gold from it. This result was similar to outcomes of previous metallurgical testing on Buckreef sulfide ore.
"This information will be included in a tradeoff analysis to determine the best approach to process sulfide ore, which comprises approximately 90% of [Buckreef's] 2,000,000 ounce gold resource,” Goff wrote.
Production increase imminent
TRX intends to expand production in the near term, Niehuser pointed out. By year-end 2023 it aims to increase throughput 75–100%, using its newly acquired 1,000 ton per day (1 Ktpd) ball mill.
At the current 1 Ktpd production capacity, management's production guidance for this year is 20,000–25,000 ounces of gold. The company has already achieved half of the lower end of this range, having produced 10,400 ounces of gold in H1/23. Of this total, it produced 5,636 ounces (5,636 oz) in Q1/23 and 4,764 oz in Q2/23.
As for sales, in Q1/23 TRX sold 5,505 oz at an average gold price of about $1,853/oz, in Q2/23, 4,810 at $1,963/oz.
Exploration upside remains
Buckreef likely hosts more mineralization than what the previous resource estimates indicate, Niehuser purported, specifically in certain targets on the property not fully tested. They include Eastern Porphyry, Tembo and Bingwa.
Recent surface drill testing of Eastern Porphyry seems to prove this out as it showed high-grade gold mineralization. Hole BMDD298, for instance, returned 3.48 grams per ton (3.48 g/t) gold over 14 meters (14m), including 10.96 g/t over 3m starting at 27m downhole, and 1.62 g/t gold over 25.23m starting at 47m downhole.
Niehuser wrote that ROTH considers these areas "to have the potential to expand and extend production from oxides to be processed through the existing plant and significantly extend life of operations."
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