Only capitalised at just £48.3m, the shares of Condor Gold (LON:CNR and TSX:COG) could well be in for an early uplift in price.
Analysts at its broker, SP Angel, currently have a valuation out on the group’s shares of 97p, which is some four times its 23.5p market price.
The Business
It is a gold exploration and development company with a focus on Nicaragua, where its principal asset is the La India Project, which is a large, highly prospective land package of 588 sq.km comprising of 12 contiguous and adjacent concessions.
La India For Sale
Almost two years ago, in late November 2022, the company announced that following a robust and economically attractive Feasibility Study on the La India open pit, it had appointed Hannam and Partners to seek a buyer for the assets of the company.
In mid-May this year the company issued an Update on the Sale of its Assets.
It stated that, as at 16th May 2024, eight companies were under Non-Disclosure Agreements, five non-binding offers having been received and three site visits completed.
The company went on to note that although none of the non-binding offers had progressed to firm proposals at that date, it was in advanced discussions with one gold producer, while two other parties were actively reviewing the company’s assets.
A further Update on the potential was issued at the end of last month, with the company reporting that there were eleven companies under NDA’s, with it having received five non-binding offers, while three site visits had been completed.
In addition, it had also received an additional formal expression of interest in July.
Chairman and largest shareholder, with 26.1% of the group’s equity, Jim Mellon stated that:
“There remains substantial interest from gold producers to acquire the Company’s assets.
Wholly owned, fully permitted, construction ready gold mines with potential production of 150,000 oz gold per annum, in major Gold Districts, with the land and a new SAG Mill package purchased and a construction period of only 18 months are rare.
There are currently eleven companies under NDAs, five non-binding offers received and three site visits completed.
Whilst discussions have ceased with one gold producer previously referred to, the Company is now focused on active discussions with three other gold producers, one of which we consider the preferred bidder.
Companies under NDAs have access to a virtual data room, which includes all drill data, technical studies to Feasibility Study level, details of permits to construct and operate a mine and financial models.
While the sales process is taking longer than anticipated, new enquires continue to be received.
Record gold prices of over US$2,400 oz gold in recent weeks compared to a US$1,600 oz gold price used in the Feasibility Study, materially improves project economics.
The Board remains confident that a binding agreement can be reached and Investors will be updated in due course.
Meanwhile, the entire Board, including the executive, will continue to give their full attention to obtaining the best outcome possible for all investors.”
Analyst’s View
At SP Angel, the company’s broker, a trio of its analysts – John Meyer, Simon Beardsmore and Sergey Raevskiy – note that the company is advancing the sale process for its advanced stage, 2.3m oz La India gold project in Nicaragua and the surrounding exploration areas.
The 2022 feasibility study describes development of an open pit mine at La India as the first phase of development producing approximately 82,000oz pa of gold.
Expansion through the subsequent development of already permitted satellite pits and of underground mining has the potential to increase output to around 150,000oz pa.
A completed feasibility study and in-place development permits provides a successful acquirer with an opportunity for rapid development of an advanced gold project with expansion potential and further exploration prospects.
The analysts state that using SP Angel’s long-term gold price forecast of $2,450/oz, they estimate that the NPV10% of Condor Gold’s planned initial development of an open pit mine on the La India vein at around $287m, which would be equivalent to 97p a share.
In My View
The recent strong rise in the price of gold provides an excellent backdrop for investors to perceive the value of Condor Gold’s shares.
The potential sale process has taken some time, but it does feel as though it is coming closer to a conclusion, which could really push upwards the group’s value.
The shares were up to 37p on 7th May this year, before drifting back and stabilising now at around the 23.5p level.
With so many interested parties, combined with the yellow metal’s soaring value, I do feel it would be wrong to dismiss what could well be a dramatic potential uplift when any offers come to fruition.