Contrarian, long/short equity, Deep Value
MARKETPLACE
Unorthodox Mining Investing
(2,805 followers) Summary
In Q3 2018, Alacer Gold will start producing gold from the sulfide zone of the Copler mine.
In my opinion, there are two not widely known factors that have a positive impact on the company's valuation.
In this article, I discuss these factors; in the final section, I am trying to assess the updated value of Alacer shares.
I am a big fan of under-followed, unpopular precious metals mining companies. Alacer Gold (OTCPK:ALIAF) is such a company. It currently runs the Copler mine, an open pit oxide ore operation located in east-central Turkey. Very soon, in Q3 2018, the company plans to commence mining at the sulfide zone of the Copler deposit. In my opinion, this project has a big, positive impact on the company's valuation. According to the technical report for the sulfide expansion project, its net present value is $728M. However, there are two issues not widely perceived:
Due to the fact that the project is 85% completed and most of the capital expenditures have been already made, the project's value is much higher than that disclosed in the economic study.
Over the years, the company has stockpiled a lot of sulfide ore, improving the project's economics further.
As a result, today, the company's shares are undervalued, and Alacer presents, in my opinion, an interesting buying opportunity.
