Alacer Gold (ASR-T) is the best company to enjoy a future Gold price recovery
Alacer Gold is a leading intermediate gold mining company. It has an 80% interest in the world class Çöpler gold mine in Turkey. It is the only property of the firm. With only one active mine, Alacer Gold expects to produce between 160,000 and 180,000 ounces of gold.
The Çöpler gold mine has one of the lowest production costs in the world. It is mainly due to the deposit geology. In fact, the mine has a relatively high head grade of 1.6 g/t. The low production cost is the result of this high grade deposit combined with a soft ore. Subsequently, the Çöpler gold mine has an all-in sustaining cash cost of only $711 per ounce. Barrick Gold (ABX-T) is the world's biggest gold miner and it has an all-in sustaining cash cost of $834 per ounce. The picture is the same for every major gold miner. The following table is based on the Q3 2014 all-in sustaining cash cost per ounce.
| Company | All-in sustaining cash cost per ounces | | Barrick Gold | $834 | | Goldcorp (G-T) | $1,066 | | IAMGOLD (IMG-T) | $1,115 | | Kinross (K-T) | $919 | | Yamana Gold (YRI-T) | $807 | | Newmont Mining (NEM-NY) | $995 | | Alacer Gold (ASR-T) | $711 |
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The table shows that Alacer Gold is well below the average production cost of $928. In my opinion, it is the principal competitive advantage of the firm.
On the other side, it is also interesting to mention its strong balance sheet. With absolutely no long term debt and a current ratio (C.Assets/C.Liabilities) of 9.32, the company is well positioned to capitalize on a future recovery in the gold price. Furthermore, with a margin per ounce of approximately $500, Alacer Gold is profitable at the current price.
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With a trailing twelve months EPS of $0.18 and a stock price around $2, Alacer Gold has a price to earnings ratio of 12. Based on the growth potential, I consider that it is cheap valuation. Actually, the June feasibility study demonstrated robust financial returns from processing sulfide ore. It extended the Çöpler's mine life by an additional 17 years. With this new project, Alacer Gold expects to produce 270,000 ounces of gold in 2019. It is a 59% increase from the actual production rate. Moreover, the all-in sustaining cash cost is expected to decline to approximately $600 per ounces with the sulfide expansion.
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In conclusion, Alacer Gold has one of the lowest production costs in the world. With its strong balance sheet and its impressive growth potential, I consider that the company presents a valuable upside potential. Even if this challenging environment continues, Alacer Gold remains largely profitable. Despite these positives characteristics, it is always important to do your own due diligence.
Disclaimer: The company's common shares are mainly listed on the Toronto Exchange, but also on the OTC in the U.S. It does not trade on a major exchange in the United States. Please be aware of the risks associated with this factor. This article is in no way a recommendation to buy or sell any stock mentioned. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade. |
