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Growth Portfolio: Teranga Gold Corporation (ASX: TGZ)

Published 05-MAY-2015 00:00 A.M.


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Overview: Teranga Gold Corporation ("Teranga", "the Company") is a Canadian company focused on gold mining in Africa. Its primary asset is the Sadiola Gold Mine in Senegal, which was commissioned in 2009. Sadiola hosts a 3.5Million tonne (Mt) pa processing mill and produced 212,000oz during 2014 at the all-in sustaining cost of $865/oz ("AISC"). Proven and Probable Reserves are 59Mt grading 1.36g/t for 2.6million oz. These Reserves are contained within Measured, Indicated, and Inferred Resource estimates totaling 8.4million ounces.

Catalysts: Free cash flow has risen for the past two consecutive years amid a weakening gold price regime, providing a platform for counter-cyclical acquisitions. Supported by a ‘first mover’ advantage in Senegal, and a regional land package exceeding 1000km 2 , opportunities have been identified to more than double production in the medium term.

Hurdles: Development of the high-grade Gora deposit is scheduled to see AISC rise in 2015. Last year’s streaming deal to finance its acquisition of the Oromin Joint Venture requires delivery of 22,500oz for the next six years, and 6 percent for the balance of mine life at 20 percent of the spot price.

Investment View: Teranga offers profitable exposure to the gold mining industry. We are attracted to its recent operating performance, financial position, and organic growth potential over the medium term. Scalability of the Sadiola operation is expected to mitigate costs associated with last year's streaming transaction and current development works. With the Company well placed to benefit from any cyclical recovery in the gold market, we initiate coverage with a ‘speculative buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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