TFSA Investing: 1 Precious Metals Value Stock Trading Cheap

Steppe Gold Ltd. (TSX:STGO) owns an additional exploration stage mineral property in Mongolia, which could be a very valuable asset.

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

The previous owner of the property had conducted drilling programs, obtained permits and licenses for exploration, mining operations. The company chose to move forward with the project and successfully completed the construction. The updated mineral resource estimate was used to update the interpretation of the geologic model, geometry of the mineralized zones, and domains resulting in a higher degree of confidence in the resource estimate.

Successful preliminary studies

The drill programs were successful, including returning samples with visible gold and intersecting high-grade zones. The new resource estimate reflects a significant increase in total resources. The company has all required permits and commenced gold production with the first gold pour in August 2020.

Recently, the company acquired the ATO Project for $19.8 million. The ATO gold mine achieved commercial production in April 2020 after meeting all required metrics. The mine is an open-pit mining operation with a heap leach processing circuit.

Focused on safety

Further, Steppe has had a 100% safety record over the last 12 months. The company considers safety to be a measure of success and management has put the safety of the company’s staff and contractors at the forefront of operations to ensure all employees return home safely after every shift.

Gold sales for the three months ended March 31, 2021, amounted to 945 ounces. During this period, the company mined about 170,000 tonnes of ore from the pit and stacked about 189,000 tonnes of ore on the heap leach pad. Capital expenditure for the three months was $1.0 million, compared to $0.3 million for the three months ended December 31, 2020.

Operational challenges

The company has continued to mine and stack throughout the winter months at planned rates. It now has approximately 1.4 metres of ore stacked on the leach pad. Steppe Gold had paused leaching and gold production in the first quarter of 2021 as cold weather made leaching conditions less favourable. This allowed for a full quarter of plant maintenance and the company is reaping the benefits of this in current production.

The cold weather disruption is expected to be remedied for the 2021 winter season with the installation of a boiler plant to heat process water nearing completion.  The company also wanted to conserve key chemicals and reagents for the warmer months given the continuing COVID 19‐related supply constraints.  The company resumed leaching and production in early April 2021 with a successful gold pour in late April.

Future outlook

Steppe Gold is targeting annual production in 2021 and 2022 of 50,000 pounds followed by a transition to the fresh rock ores in 2023. The company reported a slow start to production in 2021 and the achievement of full-year production forecasts are dependent on no further delays on procurement due to COVID 19.

Despite these operational challenges, the stock appears extremely cheap based on the intrinsic value of the company’s assets.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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

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