{"id":67918,"date":"2023-10-02T14:56:14","date_gmt":"2023-10-02T18:56:14","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/galiano-gold-galiano-gold-production-increase-and-excellent-growth-potential-nysegau\/"},"modified":"2023-10-02T14:56:24","modified_gmt":"2023-10-02T18:56:24","slug":"galiano-gold-galiano-gold-production-increase-and-excellent-growth-potential-nysegau","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=67918","title":{"rendered":"Galiano Gold: Galiano Gold: Production Increase And Excellent Growth Potential (NYSE:GAU)"},"content":{"rendered":"
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Introduction<\/h2>\n

Galiano Gold (NYSE:GAU<\/span>) operates and manages the Asanko gold mine,<\/strong> or AGM, located in Ghana, West Africa, jointly owned with Gold Fields (GFI). Also, Galiano Gold owns the Asumura project<\/strong> indicated below (see map below).<\/p>\n

Note:<\/strong> Galiano is the joint venture operator and <\/span>receives an annual service fee<\/strong> from the JV. Gold Fields Limited owns a <\/span>45%<\/strong> equity interest in the AGM JV, with the Government of Ghana owning a <\/span>10%<\/strong> free\u2010carried interest.<\/span><\/p>\n

On August 2, 2023, Galiano Gold reported its 2Q23 results.<\/p>\n

Note:<\/strong> I have followed GAU quarterly since 2021. This new article is a quarterly update of my article published on July 7, 2023.<\/p>\n

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GAU Asset Map (GAU Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Note:<\/strong> Asanko Gold Mine is called AGM<\/strong> in its abbreviated version. The AGM is a multi-deposit complex with four main open-pit mining areas<\/strong>: Abore, Miradani North, Nkran, and Esaase, and multiple satellite deposits on the Asankrangwa Gold Belt.<\/span><\/p>\n

1 – 2Q23 Results Snapshot<\/h3>\n

Gold production was 33,673 Au ounces<\/strong> during 2Q23, down 32.7%<\/strong> from last year. Full-year gold production guidance has been revised upward from 100K Au Oz to 120K Au Oz to 120K Au Oz to 130K Au Oz.<\/strong><\/p>\n

Gold revenue was $64.066 million<\/strong>, generated from 32,912 gold ounces<\/strong> sold at an average realized price of $1,944\/oz<\/strong> for the quarter. The net income for the company was $11.96 million<\/strong> or $0.05<\/strong> per share during the quarter, including the Company’s share of the JV’s net earnings for the quarter.<\/p>\n

Note:<\/strong> 2023 Guidance for gold is between 120K and 130K Au ounces<\/strong>. GAU revised AISC to between $1,650\/oz and $1,750\/oz<\/strong> due to strong operational cost performance in 2Q23.<\/p>\n

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GAU Guidance and Production (GAU Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

2 – Stock Performance<\/h3>\n

Galiano Gold has significantly outperformed the VanEck Gold Miners ETF (GDX) and is now up 21%<\/strong> on a one-year basis. The recent weakness experienced with the gold price has been an important factor in the sudden drop in the stock price.<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

3 – Investment Thesis<\/h3>\n

The investment thesis for GAU is the same as the previous quarter, even if the miner had some technical issues in the past. The AGM gold mine has been Galiano’s flagship asset since 2016 and is waiting for the open-pit’s restart at Abore, which will significantly increase gold production.<\/p>\n

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The Asanko Gold Mine is expected to produce between 120,000 to 130,000 ounces from stockpiled material in 2023, at all-in sustaining cost guidance of between $1,650\/oz to $1,750\/oz. All-in sustaining cost is anticipated to be elevated in 2023, primarily due to waste stripping necessary to restart mining at Abore<\/strong>, which will benefit future years production, as well as higher expenditures on the tailings storage facility.<\/p>\n<\/blockquote>\n

However, I do not think GAU is a good fit for the long term due to its extreme specificity, but it is an excellent tool for short-term and medium trading using the LIFO strategy. Those penny stocks can jump significantly overnight and carry more volatility than solid companies with more complex business profiles.<\/p>\n

The major problem is that the stock is based on one single<\/strong> JV in West Africa (double whammy), considered high-risk from a long-term investor’s perspective. However, on the other hand, Gold Fields’ potential to acquire Galiano Gold is a good incentive to keep a position on the side.<\/p>\n

The company presents a solid balance sheet and excellent growth potential, significantly reducing the chances of short-term collapse. Galiano has about $115 million in liquidity<\/strong> with Cash and cash equivalents of $55.50 million<\/strong> as of June 30, 2023, while remaining debt free.<\/p>\n

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GAU Liquidity (GAU Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

On March 28, 2023, the Company published an updated National Instrument 43\u2010101 (“NI 43\u2010101”) Technical Report for the AGM, which included the reinstatement of Mineral Reserves<\/strong>. It revealed an improved long\u2010term outlook for the mine.<\/p>\n

The mining at AGM is expected to restart during 4Q23<\/strong> as scheduled in the 2023 Technical Report. The company is expected to double production to ~250K Oz<\/strong> per year by 2025.<\/p>\n

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GAU schedule restart (GAU Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Thus, I recommend trading LIFO for about 60%<\/strong> of your overall position but keeping a medium long-term position for a potential future acquisition offer in an all-share deal later in 2024.<\/p>\n

Galiano Gold: 2Q23 Balance Sheet History – The Raw Numbers<\/h2>\n

Note:<\/strong> The Joint Venture is split 50\/50 for the 90% economic interest, with the Ghana Government holding 10%. Therefore, Galiano Gold and Gold Field own 45% each<\/strong> of the Joint Venture.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n
Galiano Gold<\/strong><\/td>\n2Q22<\/strong><\/td>\n3Q22<\/strong><\/td>\n4Q22<\/strong><\/td>\n1Q23<\/strong><\/td>\n2Q23<\/strong><\/td>\n<\/tr>\n
Total Revenues $ million (100% basis)<\/td>\n84.89<\/td>\n76.91<\/td>\n57.81<\/td>\n65.19<\/td>\n64.07<\/td>\n<\/tr>\n
Quarterly Earnings in $ million<\/td>\n12.57<\/td>\n1.28<\/td>\n28.50<\/td>\n8.49<\/td>\n11.96<\/td>\n<\/tr>\n
EBITDA $ million<\/td>\n12.61<\/td>\n1.32<\/td>\n28.54<\/td>\n8.54<\/td>\n12.00<\/td>\n<\/tr>\n
EPS (diluted) $ per share<\/td>\n0.06<\/td>\n0.01<\/td>\n0.13<\/td>\n0.04<\/td>\n0.05<\/td>\n<\/tr>\n
Operating Cash Flow $ million<\/td>\n2.57<\/td>\n1.54<\/td>\n0.84<\/td>\n-0.54<\/td>\n-1.38<\/td>\n<\/tr>\n
CapEx in $ million<\/td>\n0.00<\/td>\n0.00<\/td>\n0.00<\/td>\n0.03<\/td>\n0.01<\/td>\n<\/tr>\n
Free Cash Flow in $ million<\/td>\n2.57<\/td>\n1.54<\/td>\n0.84<\/td>\n-0.57<\/td>\n-1.38<\/td>\n<\/tr>\n
Total cash in $ million (100% basis)<\/td>\n53.01<\/td>\n54.72<\/td>\n56.11<\/td>\n56.17<\/td>\n55.50<\/td>\n<\/tr>\n
Total LT Debt (incl. current) in $ million<\/td>\n0.00<\/td>\n0.00<\/td>\n0.00<\/td>\n0.00<\/td>\n0.00<\/td>\n<\/tr>\n
Shares Outstanding (diluted)<\/strong> in millions<\/td>\n224.94<\/td>\n224.94<\/td>\n224.96<\/td>\n224.95<\/td>\n225.29<\/td>\n<\/tr>\n<\/table>\n

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