Sold-down Dacian a buying opportunity, says senior analyst

7th December 2018
Resources Rising Stars

A combination of the improving outlook for the gold price and the recent sell-off in Dacian Gold shares presented a compelling opportunity for investors, Blue Ocean Equities senior analyst Steuart McIntyre says.

In a note to clients, McIntyre provides what he describes as “a very simple thesis” on Dacian, which is ramping up production at its Mount Morgans gold project in WA.

He points to recent comments from US Federal Reserve Chairman Jerome Powell, which were seen as opening the door for a potential pullback in projected interest rate hikes for 2019, as evidence that the macro outlook for gold is improving.

“Why has Dacian been sold down,” McIntyre asks. “One institutional shareholder recently sold its entire holding in the stock and has completed its selling.

“But (the company’s) AGM presentation shows production ramp-up is progressing well.”

He notes Dacian has “$82m in cash/liquidity (doesn’t need money near term) and is targeting commercial production by end CY18 which remains on track (only a month away now)”.

McIntyre says Dacian’s FY19 guidance is 180-200,000ozpa, weighted to the second half of the year, and that it is targeting all-in sustaining costs of A$1,000/oz – ie AISC margins of A$680/oz at spot on ~200,000ozpa for ~10 years.

“We also spoke with the CEO today who reiterated the commentary at the AGM three days ago… operations are ramping up really well… and there is no fundamental reason why the stock has been sold down.

“For those looking to add a bit of gold to the portfolio on the Fed comments last night (a good idea in our view)… in our view the recent pullback in Dacian’s share price represents an attractive entry point.”

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