Teranga Gold TGZ Sabodala 1

Teranga Gold (TGZ.TO) completed a successful 2017 wherein it produced just over 233,000 ounces of gold at its Sabodala project in Senegal. The higher gold price and good production results have increased the year-end cash position to $88M, which will allow the company to develop its next project; the Banfora gold project which has now been renamed into Wahgnion.

You already know our opinion about Wahgnion – the acquisition of Gryphon Minerals seems to be a total failure for us as the acquisition cost + the sunk costs (drilling, pre-development) come in higher than the net present value of the mine, meaning Teranga’s shareholders will be made poorer by the acquisition decision (unless the gold price continues to increase). We like(d) Teranga for the Sabodala project, and hope its next acquisitions will be shareholder accretive rather than destroying value for everyone involved.

For 2018, Teranga Gold expects to produce 210,000-225,000 ounces of gold, which appears to be slightly higher than the 213,000 ounces expected in the NI43 technical report. This should put the company more or less on track to effectively generate the $230M in free cash flow it was eyeing between 2018 and 2022. Teranga will report its full-year financial results on February 23rd.

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The author has no position in Teranga Gold. Please read the disclaimer

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