Why Did Theta Gold Mines’ Stock Double Itself In Last Six Months? 

ASX-listed gold developer, Theta Gold Mines Limited (ASX:TGM) has provided an interesting investment prospect to some investors as the stock price has doubled itself in just past six months to stand at $0.160. TGM’s year-to-date return is 88.24% with a positive price change of 60% in last three months.

Company Overview

Theta Gold Mines is a publicly listed gold development company that holds a range of prospective gold assets in a world?renowned South African gold mining region. The company recently announced an increase in its global mineral resource to 6 million ounces of gold with 44.8 Mt @ 4.18 g/t Au (26% Measured and Indicated, 74% Inferred) at TGME Theta Project.

Transvaal Gold Mining Estates Limited (TGME) is Theta’s core project, located in Mpumalanga Province adjacent to the historical gold mining town of Pilgrim’s Rest, South Africa. Theta Gold Mines holds 74% shareholding in TGME through its wholly owned subsidiary Stonewall Mining Pty Ltd and is controlling the existing TGME Carbon?in?Leach (CIL) Plant. Currently, the company is in the middle of completing a Definitive Feasibility Study (by Q2 2019) to refurbish or upgrade the plant for a 60,000 ounces per annum+ gold mining operation initially.

Increase in Mineral Resource at Theta Project

Focused on the strategy to convert a huge amount of Mineral Resource into an increased Ore Reserves, Theta Gold Mines achieved ~30% increase to 270 Koz of gold over the past 16 months in Theta Project’s open cut mineral resource inventory. Overall, the company’s JORC 2012 global Mineral Resource increased to 6 Moz Au comprising of 4.5 Moz Underground resources and 1.5 Moz Open pit resources (870 Koz Theta Project and 205 Koz Maiden Probable Ore Reserve estimate).

Combined Mineral Resources as at 1 May 2019 (Source: Company Announcement)

Chairman Bill Guy stated that Theta has shown its ability to deliver an initial Ore Reserve and extra ounces into the open cut Theta Project over just a short period of time. “The results have been as planned and the company is very excited about the potential to follow?up these results with future reserve conversions.”

However, the results pertain to Theta Project’s Mining Right (83) that hosts Iota section of Columbia Hill and some portion of Theta Hill deposit, representing only a part of the company’s overall holdings across the Mpumalanga province.

March 2019 Quarterly Report

For the quarter ended 31 March 2019, Theta Gold Mines continued the drilling and feasibility work on the Theta Project. The drilling at Theta Hill and Columbia Hill has reportedly demonstrated the potential for shallow, high-grade gold to be incorporated into reserves.

As per the company’s information, the drilling work was focused on infill drilling and defining reserves as part of the feasibility work while feasibility work included mine scheduling, plant design, resource/reserve modelling and associated geological/engineering design. In the initial phase, the company targets the refurbishment of the Carbon?in?Leach (CIL) plant to an initial 500ktpa capacity.

Results from the RC program at Theta Hill, Columbia Hill and Scammels released in January 2019 highlighted:

• 11m @ 2.1 g/t Au from 8m in DG4RCWAD16 (incl 1m @ 9.5 g/t Au, Theta Hill)
• 1m @ 10.1 g/t Au from 18m in RCBHI44 (Columbia Hill)
• 1m @ 27.5 g/t Au from 8m in DG4RCWAD20 (Theta Hill)

Resent drilling results at Columbia Hill post the quarter end include:

• 2m @ 18.2 g/t Au from 66m in RCBH I90
• 2m @ 23.7 g/t Au from 75m in RCBH I67
• 1m @ 23.3 g/t Au from 12m in RCBH I95

As at 31 March 2019, the group had US$113,000 in cash.

Feasibility Study Results

Theta Gold Mines reported positive results from the feasibility study for its Theta Project located in Mpumalanga Province, South Africa. The study has confirmed the gold mine’s potential to become one of South Africa’s lowest cost gold producers based on solid project economics and commercial viability.

The Feasibility Study has indicated a peak funding requirement of USD29.2 million and post permitting and financing, a short 9 months of construction/refurbishment period. It further presented that with a head grade of over 2.7g/t Au to mill, and high metallurgical recoveries (91.6%), the results for the project are robust for shallow pits with an average depth of 70 to 90m.

Key Aspects of Feasibility Study ? Theta Project Financial Summary with LoM Average Gold Price of USD 1,257/oz (Source: Company Announcement)

Mr Bill Guy stated: “The results of the Feasibility Study have confirmed the economic viability of developing an open cut mine at the Theta Project.”

On the capital front, Feasibility Study outlined the total capital cost of USD 34.3 million over the 5-year life of mine. The largest component of the project capital was reportedly associated with the new processing plant that includes the installation of a new crushing, milling, gravity, CIL, elution, gold room, cyanide destruction and tailings filtration circuits.

As per Theta, “46% of the tailings will need to be filtered in order to produce a product to assist in constructing a stable tailings dam that can accommodate the deposition volumes on the dam. Without this tailings filtration circuit, the tailings dam would not be able to accommodate the full volumes for the project.”

Moreover, the NPV of the project excluding the Inferred Mineral Resources, i.e. only considering the potential Ore Reserve, is USD40.3 million at a real discount rate of 5 % with an IRR of 52.5%, indicating that the project is economically viable, and an Ore Reserve can be declared. Revenue over LoM has been estimated to USD252.6 million with EBITDA margin estimated to 39% as per Theta’s Feasibility Study.

The company informed that over 200 laboratory bottle rolls were done on the Reverse Circulation chip samples to ensure that during the drilling campaign the material being sampled would continue to demonstrate the oxidised nature of the ore and return > 90% leach recoveries.

Going forward, Theta Gold Mines aims to establish a solid production platform from Theta Project based mainly around shallow, open?cut resources as it has access for more than 43 historical mines and prospect areas.

Stock Performance:

TGM got listed on the Australian Securities Exchange (ASX) in April 2011. The stock last traded at $0.160 with the market capitalisation of $61.02 million and 381.39 million outstanding shares as on 28 June 2019.

Over the past 12 months, the stock has returned 45.45% with a positive price change of 60.00% recorded in the past three months.

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