Argonaut ups Bardoc valuation on accelerated gold production plan

Bardoc’s plan to bring forward gold concentrate production from its Aphrodite deposit has improved Argonaut Securities’ valuation of the company up from 12c to 14c.

The company recently announced that it is studying an alternate plan to that presented in its March 2021 definitive feasibility study, which could accelerate production growth and cash flow.

Bardoc Gold’s (ASX:BDC) DFS had outlined some attractive economics such as life-of-mine (LOM) pre-tax cash-flow of $740m at a $2,250 per ounce gold price and pre-tax net present value of $479m and internal rate of return of 41% from average annual gold production of 135,760oz for 8.2 years.

However, the revised plan indicates the potential for gold production to be significantly increased during the first five years of operations, which would result in improved free cash-flow in early years.

This will be achieved by the construction of a float circuit with the initial 2.1 million tonne per annum processing facility that allows for earlier production of its highest value deposits at Aphrodite.

Extra upfront capital costs required to bring forward construction of the flotation circuit can be offset by other infrastructure cost reductions.

The company has also kicked off exploration at the Zoroastrian deposit and released drill results such as 9m at 2.45 grams per tonne (g/t) gold from 61m and 1m at 18g/t gold that highlighted the prospectivity of the North Kanowna Star deposit.

Higher valuation

Argonaut said that the resulting changes in its model have increased its estimated net NPV of the Bardoc project up from $209m to $257m.

This has scope for further improvements through underground mine-life extension.

It added that while there are regional exploration opportunities, the biggest near-term potential upside to the current resource of about 3 million ounces of gold and ore reserves of 1Moz is in extensions to underground deposits.

“Exploration success here will extend underground mine life and provide higher margin ounces longer term,” Argonaut added.

An updated study is expected before the end of this month.

This article was developed in collaboration with Bardoc Gold, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.