Galane Gold (CVE:GG) Offers a De-Risked Way to Gain from the Rising Gold Price
Shares of Galane Gold Ltd (TSX-V:GG) (OTCMKTS:GGGOF) (FRA:25G) have sustained the positive momentum of the past few weeks. The rising tide of gold prices, which have remained at the $1,500 per ounce level (or higher), only partially explains the keener investor attention Galane has attracted. Galane’s current stock price has found a new plateau of about $0.07/share – almost 20% higher. But, there’s more upside, considering the solid fundamentals. These fundamentals are, as the term suggests, the very basics of any business: good and old-fashioned production and sale of goods, otherwise known as revenue and earnings.
Last August 15, Galane issued its 2019 Q2 financials, which were full of important ‘fundamentals’ in the strictest sense of the term. Focusing on the highlights, Galane produced 8,692 ounces of gold in and sold 8,700 ounces in the second quarter at an average of $1,305/oz. The highlight, however, was the fact that Galane secured $2.889 million in cash-flow from operating activities at its Mupanegold mine: the most important gold producer in Botswana. At well over 8,600 ounces in the second quarter, Galane is well on its way to achieving (or surpassing) its yearly gold production target of 32,000 ounces. Moreover, in neighboring South Africa, Galane has launched production at the revamped Galaxy Project, located in the Barberton Greenstone Belt – host to some of the most prolific gold deposits in the world. Greenstone Belt, as it happens’ is not just a name. It refers to a well-known geological formation, known to be rich in mineral deposits from silver to zinc.
Most notably, greenstone belts contain gold.
Galane’s Galaxy covers some 58.6 km² of the Barberton Greenstone Belt and the company remains in track to achieve full commercial production in mid-2020. Galane refurbished an old facility and started to produce concentrate, achieving more than initially expected, such that it has a target production of some 2,300 ounces of payable gold (and at much higher prices than in the second quarter, given current trends and higher global geopolitical and macroeconomic uncertainty) to be produced by the end of 2019 from the Galaxy project. Moreover, Galane believes it will be able to sustain an average annual production of 25,000 ounces of gold at operating costs (cash cost per ounce) lower than $800. Now, consider that gold prices will be some $200/oz. higher in Q3 (and most likely in Q4) to better appreciate the earnings potential of a gold miner such as Galane: at current production levels alone, the gold price differential would add about $1.74 million in cash-flow.
Effectively, Galane represents a largely de-risked proposition -involving well-known orebodies, which have been mined since 1888 – for investors wanting to take advantage of gold mining stocks, as the markets are showing ever clearer signals of uncertainty and volatility. And the resource is quite simply-there are no other words to describe it-huge. In fact, Galane is surrounded by large scale neighbors such as Pan-African Resources, which has produced annual amounts in the range of 90,000 to 95,000 ounces for years.Of course, what happened in the past is not going to move the stock price in the future. But the past does offer than adequate assurances that Galane will be in a position to deliver results. It boasts orebodies, which the market expects, and it has the infrastructure in place to boost production. In 2020, as Phase II of the project gets underway, Galane plans to double the milling (and a suitable mill has already been built) and mining capacity. The additional costs needed to ramp-up operations will be easily financed thanks to the higher earnings made possible by the higher gold price.
Galane has used modern technology and mining techniques to refurbish two well-established mining operations, respectively in Botswana and South Africa. Galane is not trying to find adequate gold concentrations to define the best ore concentration zones: Galane already has two proven resources and Galane has already started to deliver revenues. This makes it a rare find in the junior space, which is typically filled with ‘potential’ rather than real and ‘actual’ opportunity. Apart from the mine’s established mineralogical characteristics and production capacity, senior professionals with years of experience in mining, processing and large-scale exploration.
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