TRX Gold Corp. (TNX:TSX; TRX:NYSE.American) is pursuing low-cost development of its flagship Buckreef gold project in Tanzania, thereby protecting shareholder value, reported ROTH Capital Markets analyst Mike Niehuser in a June 21 research note.
"TRX's approach has built-in development, operational and financial flexibility to manage growth out of cash flow and minimize dilution," Niehuser wrote.
Significant Potential Gain
As such, ROTH projects a noteworthy gain for investors in TRX of 122%, noted Niehuser. This is reflected in the gap between ROTH's target price on the gold miner of US$1 per share and TRX's current share price of about US$0.45.
TRX is a Buy.
Smartly Building Scale
Niehuser discussed key elements of TRX's low-cost plan for growing Buckreef.
The Canadian company is producing oxidized material on a small scale and paying for it out of cash flow rather than building and using a large plant for processing both oxide and sulfide material.
As for the processing of sulfide ore, recently produced high recoveries on testing bode well for TRX employing a low-cost approach in the future. Recently, the mining company processed a 6,500-ton bulk sample of sulfide ore from Buckreef at its existing mill and recovered 88.7% gold from it. This result was similar to the outcomes of previous metallurgical testing on Buckreef sulfide ore.
"This information will be included in a tradeoff analysis to determine the best approach to process sulfide ore, which comprises approximately 90% of [Buckreef's] 2,000,000 ounce gold resource," Goff wrote.
Production Increase Imminent
TRX intends to expand production in the near term, Niehuser pointed out. By year-end 2023, it aims to increase throughput by 75–100%, using its newly acquired 1,000 tons per day (1 Ktpd) ball mill.
At the current 1 Ktpd production capacity, management's production guidance for this year is 20,000–25,000 ounces of gold. The company has already achieved half of the lower end of this range, having produced 10,400 ounces of gold in H1/23. Of this total, it produced 5,636 ounces (5,636 oz) in Q1/23 and 4,764 oz in Q2/23.
As for sales, in Q1/23, TRX sold 5,505 oz at an average gold price of about US$1,853/oz, and in Q2/23, 4,810 at US$1,963/oz.
Exploration Upside Remains
Buckreef likely hosts more mineralization than what the previous resource estimates indicate, Niehuser purported, specifically in certain targets on the property not fully tested. They include Eastern Porphyry, Tembo, and Bingwa.
Recent surface drill testing of Eastern Porphyry seems to prove this out as it showed high-grade gold mineralization. Hole BMDD298, for instance, returned 3.48 grams per ton (3.48 g/t) gold over 14 meters (14m), including 10.96 g/t over 3m starting at 27m downhole and 1.62 g/t gold over 25.23m starting at 47m downhole.
Niehuser wrote that ROTH considers these areas "to have the potential to expand and extend production from oxides to be processed through the existing plant and significantly extend the life of operations."
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Important Disclosures:
- 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 Roth Capital Markets, TRX Gold Corp., June 21, 2023
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. 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. Disclosures: ROTH makes a market in shares of TRX Gold Corporation and as such, buys and sells from customers on a principal basis. Shares of TRX Gold Corporation may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2023. Member: FINRA/SIPC.
