Expectations for the U.S. Federal Reserve’s three rate hikes in 2018 have pushed gold bullion down nearly $21 per ounce since the beginning of December to a current price of $1,250.60 per troy ounce on the London market.
Bullion is not the only safe haven investment that went down. The VanEck Vectors Gold Miners ETF, the most liquid vehicle for traders and investors to gain exposure to gold mining companies, is also down trending.
The index is now trading at $22.70 per share. The VanEck Vectors Gold Miners ETF has lost 8.3% so far this year and has lost 12.3% since Sept. 7 when it hit its second highest level of 2017.
Therefore, the odds of uncovering value in the gold stock industry today are higher than just few weeks ago.
One of the gold mining companies that may represents a tremendous opportunity today to get exposure to the yellow metal at cheap levels is Alacer Gold Corp. (TSX:ASR, Financial).
The intermediate gold miner is trading cheap on the Toronto Stock Exchange. The gold stock is trading at CA$2.08 per share and for the 52-weeks through Dec. 18, Alacer Gold Corp. has lost 1.42%.
As is illustrated in the chart sourced from Yahoo Finance, Alacer Gold is trading below the 50- and 200-simple moving average lines:
Source: Yahoo Finance
Furthermore, the current share price is about 49.5% below the 52-weeks high of CA$3.11 per share. The 52-weeks low is CA$1.80 per share.
But, there is one more metric that indicates Alacer Gold is trading cheap today and it is the EVO, the miner’s Enterprise Value per ounce of proven and probable gold reserve. As of today, Alacer’s EVO is CA$117 per ounce (or approximately U.S. $150.50). This is one of the cheapest in the gold stocks industry at the moment. The metric is calculated as Alacer’s Enterprise Value of CA$583.45 million divided on 4,987,000 ounces of the company’s proven and probable gold reserves.
Alacer Gold Corp. is not only engaged in mining activities also in developing mineral deposits and undertaking exploration activities.
The company’s mineral and mining interests are located in Turkey where Alacer Gold has an 80% interest stake in the Çöpler mine. The gold deposit is located in east-central Turkey, precisely 550 kilometres east from Ankara and about 1,100 kilometres southeast from Istanbul.
The Çöpler mine is a world-class gold producing asset in Turkey and its development represents one of the Alacer Gold’s cornerstones in pursuing the company’s strategy to enhance shareholder value.
Alacer Gold also targets strengthening the balance sheet that as of the most recent quarter shows $131.624 million in cash on hand and equivalents, in addition to a line of undrawn credit of $220 million. The latter is under a $350 million project finance facility that Alacer Gold signed with a syndicate of lenders and that the miner is using to fund the Sulphide Project construction at Çöpler. This is an expansion type project from which Alacer expects to increase Çöpler’s life mine of 20 years and to deliver robust financial returns. Alacer expects the first production to commence sometime during the third quarter of 2018.
As of today, the company aims to produce about 160,000 ounces of gold for the entire year of 2017 at an all-in sustaining cost of approximately $725 per ounce sold.
Once the Sulphide Project is completed, Alacer expects to have brought the remaining life-of-mine gold production of Çöpler to 4 million ounces and lower the all-in sustaining cost to about $645 per ounce sold.
So far this year, Alacer produced 82,897 ounces of attributable gold (+21.7% year over year) and sold 81,280 (+22.1% year over year).
The third quarter of fiscal 2017 closed with 31,450 ounces of attributable gold produced (+69.4% year over year) and with 30,705 ounces of gold sold (+81.4% year over year) for a quarterly revenue of $49,837 (+78% year over year).
Besides the Çöpler Sulfide Expansion Project, another short-term catalyst to Alacer Gold is represented by Cakmaktepe, an aggregate of near-mine mineral deposits which are located next to the Çöpler mine. Here, Alacer has just defined an initial mineral reserve of 176,000 ounces and has increased mineral resources by 70% to 239,000 ounces. This is estimated by Alacer to contribute to the company’s total production for 2019 with approximately 50,000 ounces of recoverable gold. This announcement may have an impact on the market value of Alacer Gold already in the coming weeks.
A long-term catalyst to Alacer Gold is represented by the company’s goal of becoming a sustainable multi-mine gold and silver producer with producing assets in Turkey where exploration efforts are progressing in the Çöpler District and in other districts of the country.
Among the top institutional holders of Alacer Gold are Tocqueville Asset Management LP and Hexavest Inc., with 4,091,800 (or 1.4%) and 2,942,245 (or 1%) shares held, respectively. These holdings are valued at CA$8,715,534 and CA$6,266,982 as of Sept. 29.
Alacer Gold Corp has 293.09 million shares outstanding.
Disclosure: No positions in Alacer Gold.
