The world’s newest gold producer, Steppe Gold (TSX:STGO) announced earlier this week the commencement of gold and silver sales. The company reported 5,233 ounces of gold and 1,372 ounces of silver sold since the ATO mine commenced production on March 25th, 2020. This serves as an important milestone for the company as the company is now generating cash flow.
The company to date has mined, crushed and stacked approximately 640,000t of ore at a grade of 2.0g/t gold onto cell 1 where leaching is currently underway. Steppe remains on track to produce ~60,000 ounces in 2020 at cash costs of circa $500 per ounce, which signifies high margin production. The gold price is currently trading above $1700 USD and is trading at all-time highs in numerous fiat currencies. The extreme amounts of fiscal and monetary policy set a very favorable environment for the gold price in the years to come, representing the opportunity for Steppe Gold to have fantastic earnings leverage with higher gold prices if everything goes to plan.
As the company continues its transition as a gold producer, it will be exciting to watch developments on the exploration side of the business as Steppe can use positive cash flows from the ATO mine to expand the open pit and processing facilities so the company can eventually increase gold production to a targeted 150,000 ounces of gold annually. New resource upgrades are currently being calculated for the ATO 1, 2, 4 deposits, and an initial resource for the Mungu deposit. Investors should expect a steady stream of exploration updates this summer as drilling results for 11,000 meters of diamond core drilling targeting extensions at depth on the ATO1, ATO4 and Mungu deposits will be available in the coming months.
Steppe Gold could not have started production at a better time, with gold prices creeping higher and higher; there is plenty of evidence we have reached “peak gold.”
According to S&P Global Market Intelligence’s annual analysis of major gold discoveries, none have been made in the last three years. In fact, only 25 deposits have been discovered over the past decade, containing only 154.3 million ounces (or 7%) of all gold contained in discoveries since 1990.
This represents an opportunity for investors to not only be in a production story but a major growth story with Steppe Gold. With resource upgrades currently being calculated for the companies deposits, the remainder of 2020 is setting up to be a very pivotal yet exciting time for the company.
We recently caught up with Aneel Waraich, Executive Vice President and Director of Steppe Gold, and we asked about the exciting milestone of production sales alongside an update on exploration:
With the first gold pour now complete, how are things going with regards to scaling up the ATO mine?
We have produced over 5200 ounces of gold on our first gold pours over our first 4 weeks or so of start-up/ramp-up. This is a very strong start and exciting for us and our investors in a strong gold environment and we want to keep building this production out to get to 6-8k ounces of gold produced and sold every month going forward (summer months may be higher and winter months a bit lower). The net cash flow of ~$6.5M USD from first month sales and the additional robust cash flows from gold sales every few weeks will allow us to build a strong working capital cushion while optimizing and growing our current operations. We are currently looking at growing our mining and crushing rate from the current 3,500 tpd to 5,000 tpd that will allow us to stack and process additional oxide ore and hopefully increase the production profile for 2021, 2022 and 2023to similar rates as 2020. This will allow for more cash flow earlier on to fund and expedite Phase II expansion.
The ATO mine is now in ramp-up and we think over the next couple months we should have worked out any kinks/refinements and be able to announce commercial production which will also confirm operations are now stable. Also, this will confirm that we are generating free cash flow and we can keep accumulating cash alongside the completion of all these milestones and catalysts (increasing ATO production, resource/reserve update, further drilling on ATO/Mungu and UK projects and feasibility completion on Phase II).
When should investors expect to see the first few news releases for the 11,000 metres of diamond core drilling at the ATO1, ATO4 and Mungu Deposits?
While this ramp-up on ATO Phase I continues we can now also get back to the exciting exploration we have already concluded and get the last 11,000 meters of results processed and out to the market. This will be the final drill results that will be incorporated in the very exciting maiden Mungu resource as well as an update on ATO1, ATO2 and ATO4 hopefully showing the market that we have not only extended the life of mine or increased grade and production profile from the original oxide plan but have also added additional phase II ounces in ATO1, ATO2 and ATO4 alongside Mungu.
These results/releases on the 11,000 meters of drilling are most likely to come out within the next 60 days and we are hoping for earlier. We will have an update in the coming weeks on the expected timings of that once the lab has had an opportunity to confirm timelines.