3 Junior Gold Stocks Trading at a Discount to Cash Flow

The TSX-listed junior gold stocks we’ve dug up all trade at a discount on a cash flow per share basis

SmallCapPower | October 11, 2018: Gold prices have been falling from a one-year high of US$1,358/oz on January 24 to its current price of US$1,188/oz – a drop of 12.5% over the past 10 months. This has driven most gold stocks lower. For instance, the Junior Gold Miners ETF (ARCA:GDXJ) is down 23.5% over the same period. To illustrate upside in the sector we have identified three TSX-listed junior gold stocks that trade at a significant discount on a forward Price to Cash Flow basis NTM, as compared with their peer average of 9.8x. These stocks could have substantial upside should gold prices rally, as their current cash flow may not be incorporated into their recent stock price.

SEMAFO Inc. (TSX:SMF) – $3.01

SEMAFO is a Canada-headquartered gold mining company with production and exploration assets located in West Africa. The Company operates the Mana Mine located in Burkina Faso, which currently has a 2018 consolidated production guidance of 235-265 koz Au. Additionally, the Company has budgeted to invest $26M in its six exploratory mining projects located in West Africa. The biggest investment will be $9M spent at the Bongou Project and includes 42,000 meters of RC and 60,000 meters of auger drilling to test regional gold anomalies. In September, the Company announced commercial production had been achieved at the Boungou Mine with 90,000 tonnes of ore processed over the past 30-days, with an average grade of 2.4 g/t Au and an 83% recovery rate.

  • Market Cap: $980.1 Million
  • Forward Price to Cash Flow Per Share (NTM): 3.6x
  • 1-Month Total Return: -2.6%
  • 1-Year Total Return: -12.5%

Alacer Gold Corp. (TSX:ASR) – $2.19

Alacer Gold is a U.S.-based gold company with operating assets in Turkey. The Company’s primary asset is its Çöpler mine, which has a 2018 production guidance of 160-230 koz. On September 4, 2018, the Company announced that its newly-constructed Çöpler Sulfide Plant had begun production of oxide ore. The Sulfide plant is estimated to extend the Çöpler’s remaining life-of-mine gold production to 4Moz at a sustaining cost of $645/oz.

  • Market Cap: $643.5 Million
  • Forward Price to Cash Flow Per Share (NTM): 3.49x
  • 1-Month Total Return: -4.78%
  • 1-Year Total Return: -4.37%

New Gold Inc. (TSX:NGD) – $1.03

New Gold is gold producer and developer with assets located in Canada and Mexico. The Company’s 2018 consolidated guidance estimates between 415-480 koz Au. Currently, New Gold is continuing exploration on the Blackwater project, a Proven and Probable mineral reserve with 8.2 Moz. of untapped Au potential. Environmental Assessment approval for the Blackwater project is expected to be obtained in 2019. On September 18, the Company announced that it had entered into an agreement with Equinox Gold Corp. (TSXV:EQX) to sell the Mesquite Mine for $158M in cash.

  • Market Cap: $596.1 Million
  • Forward Price to Cash Flow Per Share (NTM): 2.04x
  • 1-Month Total Return: -6.4%
  • 1-Year Total Return: -79.1%

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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