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There is no shortage of gold development projects, but there are few single asset operations that will evolve into commercial viable gold mines.
Torex Gold Resources Inc.’s Morelos project in Mexico should achieve that goal, according to Ron Stewart, head of research at Dundee Capital Markets. He expects Morelos will produce more than 300,000 ounces per year over a 12-year mine life at total cash costs of around $500 per ounce.
The analyst’s 2013 net present value for Torex of $1.1-billion is slightly below the company’s current market cap.
“In other words, we might suggest that the market is giving the company little credit for the exploration upside, which is being regularly reinforced by the drill results at the new Media Luna and Media Luna West discoveries,” Mr. Steward told clients.
Based on all the drilling Torex has reported to date, the analyst raised his price target on the stock to $3.25 from $3.00. It closed at $2.00 on Monday.
“Ultimately the true value of TXG’s mine and exploration projects will only be known once the recovered metal has been produced and sold. We expect most of our current assumptions will be proven to be incorrect by that time,” he said.
“Despite our confessed inability to provide an accurate prediction, one thing is clear to us: Torex is developing what promises to become a productive, high margin gold mine and has made, what could prove to be a truly world class discovery at Media Luna and Media Luna West. We expect value will continue to accrue to this company for some time yet.