Sneak Peek: Nick is up 126%. Why aren't you?
Today we're bringing you a sneak peek at a position held by readers of Nick Hodge's Wall Street's Underground Profits.
Gold is staying strong even as the rest of the market is at or near all-time highs, hinting at long-term strength for gold positions and a renewed wave of activity and news.
Read on to learn more about this high-flying position, and be sure to check out the stock that Nick thinks will be next.
Editor, Outsider Club
Teranga Gold has been crushing it. I raised the buy under to C$5.00 in November, ahead of the company reaching commercial production at its second mine, Wahgnion in Burkina Faso. That mine has now come online. But the bigger news has been Teranga’s 90% acquisition of the high-grade Massawa Gold Project in Senegal from Barrick Gold Corporation.
Massawa is one of the highest-grade undeveloped open-pit gold reserves in Africa. It is located within trucking distance of Teranga’s flagship Sabodala Gold Mine in Senegal, creating the opportunity for significant capital and operating synergies. Massawa contains 2.6 million ounces of gold found in 20.9 million tonnes of ore grading 3.94 grams per tonne. The higher-grade ore will allow Teranga to produce more gold at lower costs, emerging as a low-cost, mid-tier producer with Barrick as its second-largest shareholder.
Teranga will pay Barrick US$380 million upfront for Massawa, consisting of $300 million in cash and $80 million in stock. Barrick may receive another $50 million in cash from Teranga over the next three years if gold hits certain levels. Teranga was able to quickly sell out a US$106 million bought deal. Tablo Corp., controlled by Teranga director David Mimran, invested a further $45 million to retain its 21.2% ownership.
RBC Dominion analyst Wayne Lam called this deal “game changing” for Teranga, saying:
“We believe the acquisition of Massawa is transformational for Teranga in doubling the long-term reserve base at higher grades while extending the mine life, translating into a significant uplift in production and improvement in costs by 2021.”
He has a C$8.50 price target on the company, lower than the average analyst target of C$9.88. The company achieved record production of 288,768 ounces in 2019 — its fourth year in a row of record production.
Paul Chawrun, chief operating officer, said:
“Wahgnion achieved commercial production effective November 1, 2019 and surpassed the high end of its production guidance of 30,000-40,000 ounces with a total of 47,492 ounces of gold. Sabodala topped its 2019 anticipated production guidance of 215,000-230,000 ounces with a total of 241,276 ounces of gold produced. 2019 represents the fourth consecutive year in which we have exceeded our production guidance and reported record results, a testament to the quality of our operating teams.”
Teranga was guiding 2020 gold production between 300,000 and 350,000 ounces. But it could end up being more than that if it can get the Massawa acquisition closed and start processing that ore.
Teranga has blown through my C$5.00 buy-under price. It is a hold for now, currently up 126% in the portfolio.
Call it like you see it,
Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.
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