Thesis Gold Inc.'s (TAU:TSXV; THSGF:OTCQX; A3EP87:WKN) target price was raised by Hannam & Partners to CA$2.48 per share from CA$2.04 following the release of the updated preliminary economic assessment (PEA) encompassing both Lawyers and Ranch in British Columbia, Director of Mining Research Jonathan Guy reported in a Sept. 6 research note.
"In our view, this sets out a materially more attractive project than Lawyers on a standalone basis," Guy wrote.
The new target implies a 230% return for investors, given the Canadian company's share price at the time of the report was about CA$0.75.
Greater LOM, Average Production
Guy presented the numbers for the various components of the new PEA and compared them to figures in the previous 2022 PEA.
In the 2024 PEA, the life of mine (LOM) is longer, 14 years versus 12 in 2022. Average production over the LOM is higher, too, at 215,000 ounces (215 Koz) on a gold equivalent basis versus 163 Koz, reflecting a 32% increase.
"This level of production should make the deposit, which has a resource of 4,700,000 ounces, attractive from a mergers and acquisitions perspective," purported Guy.
The 2024 average throughput is 19% higher at 12,600 tons per day (12.6 Kt/day) versus 10.6 Kt/day previously. Gold recoveries are 93%, the same as the 2022 percentage. Silver recoveries are higher now than before, at 86.1% versus 71.8%.
The New Economics
The economics in the new PEA are a US$1.3 billion (US$1.3B) net present value discounted at 5% (NPV5%) and a 35% internal rate of return (IRR). This is using a US$1,930/oz gold price and US$24/oz silver price.
These compare to a CA$589 million (CA$589M) NPV5% and a 24% IRR in the 2022 PEA, based on a US$1,725/oz gold price and a US$22/oz silver price.
Higher Sustaining Capex, AISC
Also in his report, Guy discussed the costs between the two PEAs.
Initial capex for Lawyers-Ranch is CA$598M, 24% higher than in the 2022 PEA but, the analyst wrote, in line with his expectations.
Sustaining capex is significantly higher at CA$547M versus Hannam & Partner's previous estimate of CA$226M. On the other hand, closure costs of CA$46M are lower than Hannam & Partners' previous estimate of CA$144M. Thus, the closure costs somewhat offset the sustaining capex.
The new all-in sustaining cost (AISC) is US$1,013/oz, 29% higher than US$941/oz in 2022, yet, Guy pointed out, it is US$435/oz below the current industry average.
"Higher sustaining capex is the main reason for the increase in the AISC, offsetting the impact of lower unit mining and processing costs," he explained.
Capital expenditures are CA$2,251/oz, below the CA$3,000/oz in the 2022 PEA and below the Canadian average of CA$3,596/oz.
The Operational Plan
According to the revised mine plan, open-pit mining will be done at Ranch, and open-pit and underground mining will be done at Lawyers, reported Guy.
Processing will be done through a standard recovery circuit, which includes comminution. Next, flotation, leaching, and passage through a Merrill-Crowe circuit will be done to produce a precious metal concentrate and gold-silver doré. Power for the operation will come from the BC Hydro grid.
Resource Expansion at Ranch
Guy pointed out that an expansion of the Ranch resource could further enhance the Lawyers-Ranch project. To grow the resource, Thesis Gold is drilling along the Thesis Corridor and at the Bonanza Ridge, Bonanza South, JK and BV deposits. Plus, there are nine targets that have not yet been drilled.
"We believe Ranch has the potential to ultimately be comparable to other large-scale, high-sulphidation epithermal systems and host a deposit several times larger than its current size," the analyst added.
Other Possible Optimizations
Thesis Gold is making efforts to further improve costs and economics, where possible, Guy reported. For instance, to lower trucking costs, the company is working to reduce the strip ratio at the open pits and determining whether Ranch ore could be preconcentrated through ore sorting.
Thesis Gold also is exploring whether paste fill would improve economics of the underground mining component, whether sourcing construction materials itself would lower costs and capex at the waste and tailings facilities, and whether the distribution system can be improved.
What To Watch For
Results of ongoing exploration, particularly from Ranch, should drive Thesis Gold's shares, Guy wrote.
The company intends to commence a feasibility study for Lawyers-Ranch next year.
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