Alacer Gold Corp. (ASR-TSX) continues to release value through organic growth.
The miner has announced an increase of 50% in gold production at its oxide plant to a level of 110,000 to 130,000 ounces. The all-in sustaining cost, or AISC per ounce of metal sold, has been lowered to a $650 to $700 level. Initial guidance on AISC suggested a higher range of $750 to $800 per ounce.
The improved guidance is the result of the discovery of about one metric ton of limestone rich oxide material, increased efficiency at heap leaching and gold recovery rates.
Following the news, the stock rose 0.4% to $1.92 per share on the Toronto Stock Exchange. However, more upsides are expected to occur as the market processes the information.
Now, the stock is trading above the 200, 100 and 50-SMA lines and the current share price is just a whisper away from the 52-week high of $2.01 per share. To retreat to its 52-week low, the stock must lose 30%.
I would wait for any meaningful weakness before buying shares. I agree with analysts who recommended a Hold on the stock. I would wait until the price target of $2.26 has widened at least 20%.Â
The processing of the limestone rich oxide ore with stockpiled low sulphide, which is currently shaping the heap leach pad, generates immediate cash flow, the company said. This is the catalyst to watch in the second half of 2018 as it is net asset value accretive. Hopefully, that will be recognized by the market.Â
In addition, the company produced 63,073 ounces of gold from the oxide plant in the first six months of 2018 and reaffirmed guidance of 50,000 to 100,000 ounces of gold production from the sulphide plant. The full sulphide plant will start operating in the third quarter of 2018 and the production of saleable gold is expected to occur early next year. Alacer Gold anticipates a timely delivery of the project and below budget.
The stock has a market capitalization of $565.45 million, a price-book ratio of 0.98 times versus an industry median of 2.06 times and an enterprise value to earnings before interest, taxes, depreciation and amortization (Ebitda) of 6.77 times versus an industry median of 9.9 times.
(Disclosure: I have no positions in Alacer Gold Corp.)
