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 BMO Capital Markets 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 are for exploration and general and administrative (G&A) expense between Q1/25 through Q1/27 as estimated by the National Bank of Canada.
Outperform rating, 35% return
DeMarco reiterated BMO's CA$2.50 per share target price on Montage, now trading at about CA$1.85 per share. The difference between these prices reflects a 35% return on investment.
The company remains rated 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 expense 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.
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