Torex Gold Resources (TSE:TXG) Spikes Hard as Bullish Developments Boost Sentiment

Benjamin A. Smith

Torex Gold Resources Inc (TSE:TXG) (OTCMKTS:TORXF) (FRA:73GN) is the biggest dollar gainer on the S&P/TSX Composite Index (INDEXTSI:OSPTX) in early trade today. A confluence of factors have come together to incentivize traders to boost prices higher, giving the much-embattled stock room to breathe. Shares are currently higher by ↑45.82%, or $3.51 to $11.17/share.

First off, the company reported that negotiations between community leaders have resulted in an end to the illegal blockades of the Company’s ELG Mine Complex and Media Luna Project in Mexico. While the company—in the words of Torex President & CEO—was still able to “[pull] together under very challenging operating conditions and [produce] 67,000 ounces of gold in Dore,” the end of strike conditions should allow the company to mine more ore.

Looking forward, Torex Gold Resources believes operations are “well positioned to complete the ramp-up in 2018 and to move forward with optimization and development initiatives.”

This announcement removes a significant visibility hurdle for the company. To date, 2018 guidance has been withheld due to the striking workforce and uncertainty surrounding how many ounces the company could pull out of the ground. With the matter settled, guidance could be forthcoming when the company releases of Q1/2018 results or soon thereafter. Torex Gold has previously stated that once the full employee and contractor workforce has been re-mobilized, they will be in a better position to estimate performance for the remainder of the year.

Furthermore, the company announced that a key Sub-Sill was re-started one month ahead of schedule, as did a previously announced underground diamond drilling program to find additional ore bodies.  Development activities of the Sub-Sill zone were previously suspended in Q4 2017 due to the beginning of the blockade.

Last year, Torex Gold produced 240,873 oz/gold for the year, but only 28,162 oz/gold in the Q4 because of the blockade which commenced on November 3, 2017. This metric perfectly exemplifies how detrimental the worker’s blockade had been to net production. Presumably, the company can now resume a full production schedule.

Cash reserves at the end of the first quarter were US$124 million, including US$14 million set aside for reclamation obligations. This is ample liquidity for a company which isn’t exceedingly far removed from net profitability. In Q1 2018, Torex Gold made a $9.3 million USD principal repayment to reduce the term loan under the debt facility to $290.7 million USD.


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Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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