Montage Gold Corp. (MAU:TSX.V) is "cashed up, permitted and ready to roll" at its Koné gold project in Côte d'Ivoire, reported Beacon Securities analyst Bereket Berhe in an Aug. 15 research note. Beacon raised its target price on the Canadian precious metals explorer-developer to CA$2.75 per share from CA$2.50.
Currently, Montage is trading at about CA$1.90 per share, noted Berhe. Return to the new target from here is 45%. The company remains a Buy.
"We believe this still represents a good entry point," wrote the analyst.
CA$180 million raised
Montage raised CA$180 million (CA$180M) in a now-closed private placement, by issuing about 103 million shares at CA$1.75 apiece, wrote Berhe.
Notably, the The Lundin Group increased its interest in Montage to 19.9% from 17.7%. Zijin Mining Group Co. Ltd. also invested and now owns a 9.9% stake.
Last approvals received
Berhe reported that Montage received mining permits in July for the Koné and Gbongogo deposits at its Koné project, valid for 20 and eight years, respectively. Plus, the permits may be extended if years are added to the project's life of mine (LOM). The permits are the last approvals the company needs before it may start construction, noted the analyst.
"With all permits in hand now, we will be keeping an eye on project financing, especially on the debt/streaming/equity proportions," wrote Berhe. "We believe Montage will likely prefer heavier weighting toward debt to minimize share dilution."
Update on exploration work
The work Montage has carried out so far at the Koné project highlights its "focus and potential to unlock value through exploration," Berhe wrote. "Overall, the results provide confidence and confirm the prospectivity of the Koné area."
Montage has nearly completed the US$6M, 30,000 meter (30,000m) program of mixed diamond, reverse circulation, air core and auger drilling in progress at the Koné project, the plan for which is to drill test 15 targets out of the 35 identified in seven mineralized trends. The aim is to delineate more higher-grade deposits to increase potential production at the project, to more than 300,000 ounces per year (300 Koz/year), particularly early in the LOM and to stabilize the grade later in the LOM.
One target, Diouma North, noted Berhe, has potential given its strong mineralization, cohesive nature and nearness to the haul road. A standout intercept from diamond drilling this deposit is 14.1m of 8.04 grams per ton gold 8.04 g/t Au), including 17.45m of 2.74 g/t Au and 22.45m of 1.52 g/t Au.
"Even a small but higher-grade deposit here would likely result in disproportionate positive impact on the project net present value," commented Berhe.
Plans call for a second drill campaign to test more top priority targets over 60,000m.
Further, Berhe reported, Montage management noted it is "making exceptional progress towards advanced detailed engineering" and wants to finish it before starting construction to further derisk the development phase.
The 2024 definitive feasibility study of the Koné project outlines an 11,000,000 tons per annum operation producing a total of 3,500,000 ounces of gold, or 223 Koz/year on average. Initial capex is estimated at US$712M.
Using a US$1,850 per ounce gold price, the project should return "very strong project economics," reported Berhe. They include an after-tax NPV discounted at 5% of US$1.09 billion and an internal rate of return of 31%.
What to watch for
Upcoming catalysts include additional drill results on an ongoing basis throughout the rest of 2024, project financing and in H2/24, a construction decision, Berhe indicated.
Also, Montage could transact some type of mergers and acquisitions activity at any time, which could boost its stock price.
Changes to the model
The model on Montage was updated, Berhe wrote, to reflect its new share count and the investment bank's revised gold price deck. Its new and previous gold price estimates are:
- For 2024, US$2,250/oz, up from US$2,150/oz
- For 2025, US$2,100/oz, up from US$2,000/oz
- For 2026, US$2,000/oz, up from US$1,900/oz
- For 2027, US$1,900/oz, up from US$1,700/oz
- For 2028, US$1,800/oz, up from US$1,700/oz
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