TriStar Gold (TSX-V: TSG) - Solid Brazilian Gold Developer

October 16 2020, 16:42 GMT+01:00

TriStar Gold

  • TSX-V: TSG
  • Shares Outstanding: 224M
  • Share price C$0.42 (10.08.2020)
  • Market Cap: C$94M

With gold price shooting up to over US$2,000/oz, gold explorer, developers and producers are having money thrown at them. So, where do investors get leverage and maximise the returns?

TriStar Gold is a gold exploration & development company listed on the CVE. Its 100%-owned flagship gold project, Castelo de Sonhos, is situated in Pará state, Brazil. In August 2019, TriStar Gold completed a US$8M financing with Royal Gold to get the ball rolling. It intended to use the proceeds to advance Castelo de Sonhos up to a Feasibility Study this year.

Matthew Gordon talks to Nick Appleyard, August 2020

A November 2018 PEA for what could just be one corner of the project, based on a gold price of US$1,250/oz, indicate attractive numbers.

Parameter Unit Pre-tax Post-tax
Cash Flow US$ millions 441 372
IRR % 51 43
NPV (5%) US$ millions 319 264
NPV (10%) US$ millions 233 188
Cash Cost US$/oz 660  
AISC US$/oz 687  
Initial Capital US$ millions 184  
Life of Mine Production Moz gold 1.1  
Average Annual Production oz gold 130,000  
Payback Period (Mine Life) years 1.9 (of 8.1 years)

There are some seriously solid numbers in here. That AISC of US$687/oz is world class, and 130,000oz of gold pa could make TriStar gold a meaningful mid-tier producer. A 43% IRR is evidence of just how economic this opportunity could be.

We were expecting to see TriStar Gold complete a PFS by the end of this year or Q1/21 at the latest. Despite COVID-19, the plans remain the same as before, but Q1/21 has now been definitively earmarked.

TriStar Gold was already fully-funded for its PFS and planned permitting proceedings, but it chose to carry out a further financing in June/July in the form of a US$9.2M private placement with C$914,614 recently coming in from exercised warrants relating to a January 2018 financing.

TriStar Gold not only has the cash to accelerate the development of Castelo de Sonhos, now the company has the means to bankroll an aggressive exploration programme. The big bugbear with this story has always been the mediocre life of mine: 8.1 years. It has been a barrier for investors. Appleyard acknowledges that exploration is high-risk, but he is confident in the geology of the land package and thinks it will produce impressive results. Some of these resources may be added by the time TriStar Gold publishes the PFS, but it remains to be seen if they can bulk up the scale of this gold play and make it a bit sexier. It remains to be seen if new resources will be at the category required for inclusion before the release of the PFS.

The PFS is only really going to shore up the PEA numbers, so where can investors look in this story for real growth? The exploration programme outside of the PFS is focussed on 'analysing remote sensing data over the CDS area, including magnetic signatures, radiometric data, topographic variation, and mineral abundance... As more data stacks become available, machine learning models (AI) are trained to look for similar gold-coincident signatures elsewhere on the property.' It is certainly an interesting, futuristic way to explore a gold deposit, and we wait to see if it can lead to more gold discoveries. Expect to hear more on that over the next few weeks as we track the results.

A lot of the deskwork has been done, even though COVID-19 is having a severe impact in Brazil. Appleyard is hoping to get back on the ground in late-August/September. He is tracking the capacity of local hospitals; once they have sufficient space for new admissions, he thinks it will be an appropriate moment to get back to work. According to Appleyard, TriStar Gold is currently "screaming out" to get people out on the ground. The company's staff are operating at full capacity, but they are now itching to get back into the field, discovering more gold. Let's see if the quietly spoken Appleyard and his team can hit their deliverables. If so, with some exploration upside, this could be shaping up to be a bit of a dark horse.

What did you make of Nick Appleyard and Tristar Gold?

To find out more, go to the Tristar Gold website.


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