Co. Focused on Advancing Gold Project in Cote d'Ivoire
Research Report

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Disclosures for National Bank of Canada, Montage Gold Corp., August 23, 2024

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Montage Gold Corp. (MAU:TSX.V) is concentrating on derisking financing for development of its Koné gold project in Côte d'Ivoire, now that its Q2/24 financials are filed and final permits received, reported National Bank of Canada analyst Don DeMarco in an Aug. 23 research note.

"We expect additional funding of US$675 million (US$675M) via a combination of debt and equity over H2/24, ahead of construction commencement, beginning Q1/25," DeMarco wrote.

Future costs for which additional capital is needed total about US$827M, noted the analyst. A major portion, US$800M, is for project development capex. The other US$27M is for exploration and general and administrative (G&A) expenses between Q1/25 through Q1/27 as estimated by the National Bank of Canada.

Outperform Rating, 35% Return

DeMarco reiterated National Bank's CA$2.50 per share target price on Montage, trading at the time of the report at about CA$1.85 per share. The difference between these prices reflects a 35% return on investment.

The company remains rated as Outperform.

"Our investment thesis is supported by (i) a valuation rerate as the Koné project development is derisked . . .  and (ii) net asset value accretion as Montage delivers on near-mine and regional exploration, driving resource accretion, production, and free cash flow growth," DeMarco wrote.

Private Placement Closed

The analyst presented the highlights of Montage's Q2/24 financials.

The explorer's cash spend was US$4.2M in Q2/24, up from US$2.3M in Q1/24. This was due to higher G&A expenses and share-based compensation. Capex was lower quarter over quarter (QOQ), however, and this offset the cash spend somewhat.

During Q2/24, Montage generated about US$125M of net proceeds from a CA$180M equity raise, and this contributed to a QOQ easing of liquidity. Of note, in the private placement The Lundin Group increased its investment in Montage to 19.9% and new investor Zijin Mining Group Co. Ltd. bought a 9.9% stake.

Along with the US$125M, at quarter's end Montage had US$24M in cash and equivalents, about US$2.9M in in-the-money options (due to expire over the next 18 months) for total pro forma liquidity of about US$152M. This is lower than liquidity in the previous quarter of about US$157M, consistent with ongoing G&A spend.

Koné Development Timeline

DeMarco outlined a possible timeline for Montage to develop and get Koné onstream.

Throughout the rest of H2/24, the company is expected to continue releasing drill results and, by year-end, have delineated additional resources.

"Resource conversion and accretion opportunities show potential to lift and extend the roughly +300,000 ounces per year, a wheelhouse of interest among senior producers," DeMarco commented.

In around Q4/24, earthwork would begin, assuming the front-end engineering design has been completed. Also around that time, the company should have more clarity about financing and what it would involve.

Project construction would start in about Q1/25 and take about 27 months to complete. Following that, in roughly Q2/27, the first gold pour would take place, followed by commencement of commercial production in the subsequent quarter, Q3/27.