TFSA Investing: 1 Precious Metals Value Stock Trading Cheap


Steppe gold (TSX: STGO) is a precious metals exploration, development and production company focused on asset acquisition in Mongolia. The company also owns an additional exploration-stage mineral property in Mongolia called Uudam Khundii that could be a very valuable asset.

The previous owner of the property had conducted drilling programs, obtained permits and licenses for exploration and mining operations. The company decided to move the project forward and successfully completed the construction. The updated mineral resource estimate was used to update the interpretation of the geological model, the geometry of the mineralized zones and the areas, resulting in increased confidence in the resource estimate.

Successful preliminary studies

The drill programs have been successful including the return of samples of visible gold and intersected high grade zones. The new resource estimate reflects a significant increase in total resources. The company has all the necessary permits and started gold production with the first gold casting in August 2020.

The company recently acquired the ATO project for $ 19.8 million. The ATO gold mine reached commercial production in April 2020 after meeting all of the required metrics. The mine is an open pit operation with a heap leach processing circuit.

Focused on security

In addition, steppe has a 100 percent safety record for the past 12 months. The company views safety as a measure of success, and management has made the safety of the company's employees and contractors a priority to ensure that all employees return home safely after each shift.

Gold sales for the three months ended March 31, 2021 were 945 ounces. During this time, the company extracted around 170,000 tons of ore from the pit and stacked around 189,000 tons of ore on the heap leach area. Capital expenditures for the three months were $ 1.0 million compared to $ 0.3 million for the three months ended December 31, 2020.

Operational challenges

The company continued to mine and stack at the scheduled rates during the winter months. It now has approximately 1.4 meters of ore stacked on the leach area. Steppe Gold had suspended leaching and gold production in the first quarter of 2021 as cold weather made leaching conditions less favorable. This enabled a full quarter of the plant maintenance and the company benefits from it in ongoing production.

It is expected that the cold disruption will be resolved for the winter season 2021 with the installation of a boiler system for heating process water shortly before completion. The company also wanted to keep key chemicals and reagents for the warmer months, given the ongoing supply bottlenecks related to COVID 19. The company resumed leaching and production in early April 2021 with a successful gold casting in late April.

Future perspective

Steppe Gold is targeting annual production of £ 50,000 in 2021 and 2022, followed by a transition to fresh rock ores in 2023. The company reported a slow start of production in 2021 and full year production forecasts are subject to further delays for procurement due to COVID 19.

Despite these operational challenges, the stock looks extremely cheap by the intrinsic value of the company's assets.

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Fool Nikhil Kumar has no position in any of the stocks mentioned.

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