Thesis Gold Inc. (TAU:TSXV; THSGF:OTCQX; A3EP87:WKN) released an updated preliminary economic assessment (PEA) for its flagship Lawyers-Ranch project in British Columbia, reported Ventum Capital Markets analyst Philip Ker in a Sept. 5 research note.
"With substantial mine plan optionality, exploration upside and silver exposure, we see the Lawyers-Ranch project gaining steam in a rising mergers and acquisitions environment as intermediate gold operators seek bolt-on assets to replenish their project pipelines," Ker wrote.
Stock undervalued, 112% upside
Thesis Gold is now about CA$0.73 per share, "trading at a deep discount to its peer group average," noted Ker.
In comparison, Ventum's target price on the minerals explorer is CA$1.55, reflecting a potential return for investors of 112%.
Thesis remains a Buy.
New PEA reflects optimizations
Ker reviewed the major changes between the 2022 and 2024 PEAs.
The mine plan was revised to show that underground mining is to be done earlier in the mine life and the Ranch resource was incorporated. These changes added 1,000,000 ounces of gold equivalent (1 Moz Au eq) to the production total in the 2022 PEA, taking the new figure to 3 Moz Au eq and making it one of Canada's larger undeveloped gold projects.
"Considering 3 Moz Au eq of recoverable ounces and a robust upfront mine plan, we see Thesis continuing its evolution of becoming a leading gold developer within the Canadian landscape and a rarity asset with greater than 5 Moz Au eq potential," Ker wrote.
The added ounces also increased average production over the life of mine (LOM) 32%, to 215,000 oz (215 Koz) Au eq year, including 273 Koz Au eq in the first three years. LOM was extended by two years, to 14 from 12.
The 2024 PEA outlines an operation producing 3 Moz Au eq over a 14-year LOM at an all-in sustaining cost of US$1,013 per ounce (US$1,103/oz) of Au eq.
Comparison to Ventum estimates
While most parameters within the updated PEA align with Ventum's estimates, a few differ, and Ker reviewed them. Initial and sustaining capex are higher in the PEA, at US$598 million (US$598M) versus Ventum's CA$500M and US$595M versus Ventum's CA$402M, respectively.
Two other costs differ between the PEA and Ventum's estimates but they offset one another. The PEA has an open-pit mining cost of CA$4.08/ton versus Ventum's CA$3.25/ton and an underground mining cost of CA$72.47/ton versus Ventum's CA$90/ton.
Improved project economics
Ker highlighted that the after-tax net present value discounted at 5% (NPV5%) between the 2022 and 2024 studies increased 117% and the internal rate of return (IRR) rose 47%.
In the new PEA, the NPV5% is CA$1.28 billion (CA$1.28B) and the IRR is 35.2%. This is using three-year trailing metals prices, US$1,930/oz for gold and US$24/oz for silver.
Using metal prices closer to spot, the after-tax NPV5% is CA$2.25B, and the IRR is 69.6%.
The previous PEA indicated a CA$589M NPV5% and a 24% IRR, based on US$1,725/oz gold and US$22/oz silver.
Events on the horizon
Catalysts, Ker noted, include many drill results as Thesis Gold is now completing its 2024 drill program.
Also coming up, in 2025, are a Lawyers-Ranch prefeasibility study followed by a feasibility study.
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