Robust Q1 Performance Highlights Increased Production and Revenue

Soma Gold Corp. (TSXV:SOMA; OTC:SMAGF; WKN:A2P4DU) has released its financial and operational results for the first quarter of 2024, showcasing significant progress and stable performance, according to the company. 

Soma reported a total production of 7,335 AuEq (gold equivalent) ounces, marking an 8% increase compared to the 6,796 AuEq ounces produced in the same period last year. This improvement in production is attributed to the efficient operations at the Cordero Mine and the El Bagre Milling Operations.

Revenue for the quarter saw a substantial rise, reaching US$19.3 million, up 21% from the previous year. Despite the temporary increase in production costs due to the transition to a new mining method, Soma Gold's Adjusted EBITDA remained largely consistent at US$6.3 million, compared to US$6.8 million in Q1 2023. This transition is expected to be completed by the end of Q2 2024, after which production costs are anticipated to decline, leading to improved margins for the remainder of the year.

A Dive Into The Gold Market

The gold sector experienced significant gains recently, driven by a series of economic indicators and market reactions. In a July 6 report on Mint, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, highlighted, "Gold prices in the international market have climbed to a six-week high whereas the silver rates in the international market touched a four-week high. This could happen as easing U.S. inflation concerns have boosted the U.S. Fed rate cut buzz. This rising optimism for the U.S. Fed rate cut put pressure on the U.S. dollar rate in the Forex market, and the U.S. dollar index slipped below the 105 mark."

According to Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, "Comex Gold extends gains amid rising bets that the Federal Reserve will trim interest rates before year-end after poor U.S. economic data. Swaps traders are now pricing in a 70% chance of a rate cut in September. Now, all eyes on the key U.S. jobs numbers today as it is expected to show decline in hiring and a moderation in wage growth."

Sugandha Sachdeva, Founder of SS WealthStreet, noted in the report, "Gold prices advanced by more than 2% in the week gone by as rising optimism for an interest rate cut by the U.S. Federal Reserve sooner than previously anticipated weakened the dollar index and acted as a catalyst for a strong rebound in gold prices. The recent U.S. core PCE index data, a key inflation gauge, logged its lowest annualized increase over three years. This indicated ebbing economic price pressures and increased the likelihood that the U.S. central bank will start lowering interest rates at its September meeting."

Sugandha Sachdeva added, "Gold prices got an additional boost towards the end of the week, as the U.S. economy added 206,000 jobs in June, surpassing expectations. However, unemployment rose to 4.1%, the highest since November 2021, while wage growth cooled. Besides, the job gains for April and May were revised lower, indicating a cooling labor market and decelerating inflation, leading to a further slide in the dollar index and enticing buying interest in dollar-denominated gold."

On July 9, Money Control reported insights from Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA. He stated, "After recent weak data, the market has high hopes for two rate cuts before the year ends. If Powell directly or indirectly implies that weakness is seeping through the U.S. economy, then it will be positive for gold." He further commented, "Softer inflation readings could see gold prices test the minor congestion resistance level of US$2,410 in the short term."

The CME's Fedwatch Tool also revealed, "Markets are pricing in a 77% chance of a rate cut in September and a second one by December."

A report from the Federal Reserve Bank of New York was cited that indicated, "The path U.S. inflation is expected to follow over coming years generally softened in June, amid retreating projections of price increases for a wide array of consumer goods and services."

In a report by Benzinga, Steve Miller, Chair of the ISM Services Business Survey Committee, observed, "The decrease in the composite index in June is a result of notably lower business activity, a contraction in new orders for the second time since May 2020 and continued contraction in employment."

Piero Cingari of Benzinga reported, "Gold rallies as traders raise rate cut bets following the largest contraction in U.S. services sector activity in over four years." Additionally, the Benzinga report noted, "Gold, as tracked by the SPDR Gold Trust, rallied 1.5%."

Company Catalysts

As per the official news release, the company is focusing on expanding its exploration efforts along the Otu fault to enhance its resource base and identify new mining opportunities on its Antioquia properties. The forthcoming production from the permitted Machuca mine and the ongoing permit application for the Nechi mine are expected to increase the available resources for the El Limon and El Bagre mills.

Soma Gold is also advancing the formalization process for small miners operating on its concessions, targeting that 10% of its production will come from these small-scale operations. This initiative aligns with the company's commitment to community engagement and sustainable mining practices. Additionally, Soma is in discussions with local small miners to facilitate contract processing at the El Limon mill, further supporting local economic development.

The company is reviewing potential strategic additions to its concession package, focusing on trends identified through its exploration programs. Notably, Soma plans to drill the Cordero deposit at depth using a newly acquired underground drill, aiming to confirm the extension of the deposit and increase the resource estimate.

Geoff Hampson, Soma's President and CEO, highlighted the strategic progress in the press release, stating, "The transition to a conventional mining method continued in Q1, increasing costs per ounce. This transition will largely be completed by the end of Q2, coinciding with the opening of higher-grade zones. The combination of higher grades, reduced development, and waste rock, and an increase in the number of stopes will all contribute to a strong second half of the year. We are very pleased with the progress made in understanding and interpreting the structural geology, which we believe will lead to additional resources, even in some of the mines on our property that were thought to be depleted."

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.

Important Disclosures:

1. Soma Gold Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, Soma Gold Corp. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Soma Gold Corp
3. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. 
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