Dacian shares poised for sharp re-rating on production ramp-up, says analyst

14th December 2018
Resources Rising Stars

Dacian Gold cheered investors this week with more firm evidence that it is well on track to achieve production and cost guidance at its new Mount Morgans project in WA.

RBC’s well-regarded analyst Paul Hissey took much comfort from the Dacian update, maintaining his price target on the stock of $3.25, representing substantial upside from its current price of around $2.

Dacian, which is in the process of ramping up at Mt Morgans, has guidance of 180,000-200,000oz for this financial year.

“We believe this announcement intends to provide reassurance that the development and ramp-up of the Mt Morgans project is on track with guidance maintained,” Hissey said in a note.

“The Reserve Update and the Mt Morgans commercial production milestone coming up this month should provide additional news flow demonstrating progress towards steady state.

“This announcement suggests things are on track for a 2Q inflection, although we expect the market will remain cautious on FY19 given the strong end to the year required to meet the lower end of 180,000oz.

“In addition, we continue to expect exploration to provide ongoing news flow in the short-medium term.

“We retain our positive view given valuation upside and the recent pull back, although acknowledge some investors are likely to remain cautious on the ramp up trajectory.”

Dacian executive chairman Rohan Williams said the company remained on track to achieve its guidance for FY2019 with production increasing progressively in each quarter through the year.

“The project is ramping up in line with our schedule across both the underground and open pit mining operations,” he said.

“The start of ore development at our third underground production decline at Allanson marks another important step in the ramp-up with mining activities across all three underground mining centres.

“This, together with continued strong progress at the Jupiter open pit, means we are confident of achieving commercial production, as planned, by the end of 2018 as we progressively increase production in each of the successive quarters during the year.

“The company remains in a strong position to complete the ramp-up of Mt Morgans and at the same time continue our aggressive exploration programs with A$82.1 million in cash and bullion at the of the September quarter.”

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