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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Important Disclosures:
- Thesis Gold Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Ventum Capital Markets, Thesis Gold Inc., September 5, 2024
Ventum Financial Corp. and/or its affiliates have received compensation for investment banking services for Thesis Gold Inc. over the preceding 12-month period.
Analyst Certification I, Phil Ker, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. I am the research analyst primarily responsible for preparing this report.
Research Disclosures Ventum Financial Corp. and/or its affiliates have received compensation for investment banking services for the subject company over the preceding 12- month period. Ventum Financial Corp. and/or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company
General Disclosure The affiliates of Ventum Financial Corp. are Ventum Financial (US) Corp., Ventum Financial Services Corp., and Ventum Capital Corp. Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by revenue generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that includes some of the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance, and client feedback. Analysts and all other Research staff are not directly compensated for specific Investment Banking transactions. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Ventum Financial Corp. Ventum Financial Corp.’s policies and procedures regarding dissemination of research, stock rating and target price changes can be reviewed on our corporate website at www.ventumfinancial.com (Research: Research and Conflict Disclosure)
