Turaco Gold Ltd (ASX: TCG) this week released a prefeasibility study (PFS) for its Afema Gold Project in southeast Côte d'Ivoire, which envisages a US$420 million mine development spanning more than a decade.
The Macquarie analyst team has run the ruler over the PFS numbers and has a bullish price target on the company's shares, which we'll get to shortly.
First, let's have a look at what the company is projecting.
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Solid production numbers forecast
Turaco this week declared a maiden ore reserve of 1.91 million ounces of gold, which it says will sustain a mine producing more than 200,000 ounces of gold per year.
And in terms of the mine's revenue generation, the company published figures for a range of gold prices, but at US$ 4,000 per ounce – close to the current spot price of US$ 4,192.68 per ounce – the mine would generate gross revenue of US$8.095 billion over its life of 10.3 years.
The project would also have a payback period of 10 months, or 17 months if the gold price was US$3000 per ounce.
Turaco said there was the possibility of extensions to the mineral resources, with all deposits open at depth and along strike, and there were also "numerous" additional exploration targets.
The company has immediately started a definitive feasibility study, which will also include commencing detailed design and engineering.
On the exploration front, the company will be continuing drilling with between three and five rigs operating.
Turaco Managing Director Justin Tremain said regarding the study:
In just a little over 2 years since acquiring Afema, the Turaco team has not only delivered extraordinary JORC Resource growth to 4.65 million ounces but has now also delivered a detailed development study with a maiden JORC Probable Ore Reserve estimate of just under 2 million ounces of gold based on a conservative gold price of US$2,000/oz and an AISC of just over US$1,500/oz, all within a granted mining permit. This progress is unmatched. The Study is the culmination of an extensive body of work including over 100,000m of drilling, comprehensive metallurgical variability test work, geotechnical test work, process and mine design, costing and scheduling.
Mr Tremain said the company was aiming to finish the definitive feasibility study by the second quarter of calendar year 2027 and to commence early works to allow first gold production in 2029.
Shares looking cheap
The Macquarie team said the PFS detailed a larger throughput rate than they had expected, albeit a shorter mine life than they had envisaged.
They said they expected ongoing drilling to extend the mine life of the project, and added, "We believe TCG's developer discount may unwind as further milestones are met''.
Macquarie has a price target of $1 on Turaco shares compared to the current share price of 54.5 cents. This would constitute a return of 83.5% if achieved.
Turaco is valued at $574.7 million.
