Stonegate Capital Partners has raised its valuation on Steppe Gold Ltd (TSE:STGO) to an average of C$3.55 a share, it said in an analyst note Thursday.
The gold mining company recently started commercial production from the Altan Tsaagan Ovoo (ATO) project in Mongolia and has already produced 15,300 gold ounces and sold 12,458 ounces in addition to 3,728 ounces of silver.
The research firm said it based its analysis off mine models for phase I and phase II at the ATO mine, combining the separate valuations for phase I and phase II to arrive at a range of C$3.10 to $4.05.
READ: Steppe Gold has upside potential at flagship Mongolia project, says Stonegate Capital as it lifts valuation
Stonegate started covering the stock in April this year with an initial valuation of between C$0.50 and C$1.81. In May, it lifted that to a range between C$2.08 and C$2.45, with a mid-point of C$2.26.
ATO is projected to produce strong annual cash flows with 2020 production expected to produce around 60,000 ounces of gold per year from the heap leach operation, with a cash cost per ounce of approximatelyUS$550 over the life of the mine, according to Stonegate.
An expansion project is also in full swing at the mine, with three diamond drilling rigs turning in a bid to extend the resource at deposits AT01 and AT04 as well as Mungu, a high grade, near surface gold and silver potential site located northeast of the current resources. A bankable feasibility study incorporating the expansion of the asset is expected in the first quarter of 2021, Stonegate noted.
The firm also highlighted additional exploration assets in Mongolia and Steppe’s experienced management team as factors in its valuation, as well as a recent C$15 million investment from mining magnate Eric Sprott.
Steppe plans to use the proceeds to advance its exploration and development projects.