Original-Research: Desert Gold Ventures Inc. (von GBC AG): BUY
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Original-Research: Desert Gold Ventures Inc. - from GBC AG
19.09.2024 / 06:00 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group AG.
The issuer is solely responsible for the content of this research. The
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.
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Classification of GBC AG to Desert Gold Ventures Inc.
Company Name: Desert Gold Ventures Inc.
ISIN: CA25039N4084
Reason for the research: Management interview
Recommendation: BUY
Target price: 0.311 USD
Target price on sight of: 31.12.2025
Last rating change:
Analyst: Matthias Greiffenberger, Marcel Schaffer
'This is a huge opportunity for mining investors paying attention to Mali as
valuations are only just starting to reflect the more positive reality on
the ground.'
In this interview, GBC AG speaks with Jared Scharf, CEO of Desert Gold
Ventures, a prominent gold exploration company with a focus on West Africa,
particularly Mali. Recent developments in Mali's mining sector, including
key government approvals for major players like Allied Gold and B2Gold, have
led to a optimistic market outlook for the region. Scharf provides insight
into Desert Gold Ventures' strategic position in this evolving regulatory
landscape and how the company is well-positioned to capitalize on this
momentum. He discusses potential synergies with neighboring mining giants
such as Barrick Gold, the impact of rising gold prices on their strategy,
and the company's long-term exploration and development goals. Additionally,
our recently published research report assigns a target price of USD 0.311
(CAD 0.425; EUR 0.29) with a buy rating, highlighting the significant upside
potential compared to the current share price (
https://www.more-ir.de/d/30341.pdf). Scharf also explains how Desert Gold
Ventures plans to leverage its strategic location and improving investor
sentiment to create lasting value for shareholders.
GBC AG: Mr. Scharf, with the recent announcements from Allied Gold and
B2Gold regarding their mining activities in Mali and the government's
support, how do you view the current regulatory environment for mining
operations in the country?
Jared Scharf: These are material break throughs for both companies that
cannot be understated and the market is reacting accordingly with both
company's stock moving materially higher. Moving forward this provides a
precedent, clear understanding and framework for mining companies and
investors that even with the recent challenges of the last few years, the
Malian government is supportive of the mining industry and its stake
holders. This is a huge opportunity for mining investors paying attention to
Mali as valuations are only just starting to reflect the more positive
reality on the ground. I think the market was overly pessimistic regarding
Mali. Companies like B2, Allied and ourselves have been oversold as a result
in my opinion. With the recent positive news coming out of Mali, I think a
lot of those concerns have been put to rest. I expect the situation will
continue to improve for investors who hold positions in Mali based mining
stocks.
GBC AG: The market has responded positively to these developments, as
reflected in the rising stock prices. How do you believe Desert Gold
Ventures is positioned to capitalize on this momentum in the Malian mining
sector?
Jared Scharf: Desert Gold has been building its land position in Mali and
developing its assets there since 2011. With so many geopolitical headwinds
along the way, it hasn't been an easy ride for our shareholders. I suspect
however that this dynamic is changing as we speak and the worst is behind
us. As the mining sector in country normalizes, both our exploration and
mining initiatives will become more valuable. The gold price is also
helping.
GBC AG: Considering Barrick Gold's proximity to Desert Gold Ventures and
their production hitting a 20-year low, do you see potential synergies or
opportunities for collaboration between your companies?
Jared Scharf: Barrick, like all mature mining companies, is constantly
looking for opportunities to grow their economic resource base and replace
their mining reserves. They typically do this by one of two ways; either
through brownfield exploration near their existing mines or via
acquisitions. Often times both. Desert Gold is strategically located in the
heart of West Mali's mining camp with Allied Gold bordering us to the north,
Endeavour Mining bordering us to the south west and Barrick and B2 Gold
along trend to the South. Given the regional size of our land package at 440
km2 and its location, I believe Desert Gold is a viable acquisition
candidate for the bigger players in the region. Western Mali/Eastern Senegal
has a long history of significant M&A transactions.
GBC AG: What impact do you expect the recent mining permits granted by the
Malian government to have on Desert Gold Ventures' exploration and
development timelines?
Jared Scharf: Generally speaking, I believe it shows a willingness on the
Malian Government's part to collaborate and compromise with Western Mining
companies on a productive basis to achieve positive results for all
stakeholders. I suspected that this was the case all along but I believe the
capital markets had a much more pessimistic view in recent years. With the
recent regulatory permitting breakthroughs with Allied and B2, I believe
market sentiment will gradually improve for all companies operating in Mali.
Our SMSZ project is fully supported by the Mali government and I do not
expect any regulatory permitting issues. I note that in our 10 years
in-country we haven't had any.
GBC AG: With increasing institutional focus on electrification and base
metals, many miners are pivoting towards copper and other resources. How
does Desert Gold Ventures balance the focus on gold while maintaining
relevance in this shifting landscape?
Jared Scharf: I'm somewhat skeptical regarding the narrative surrounding
base metals and electrification. I think the market is too. Look at the
lithium price for example. I do think the global economy is slowing down and
could possibly even dip into recession in 2025. I'm not sure industrial
metals will out-perform in that scenario. However monetary metals like gold
typically do perform well in that scenario. I think in that context gold is
a leading indicator for what is happening in the global economy. I don't
think this time will be any different. The macro environment reminds a lot
of 2000/2001.
GBC AG: Allied Gold and B2Gold have both recently received approvals for key
mining phases. What lessons can Desert Gold Ventures take from their
experiences to potentially expedite your own approvals and development
phases?
Jared Scharf: In our case we already have a fully permitted mining license
where we plan to start our initial open pit. So no issues there. In terms of
lessons learned, I think the biggest one is perseverance. When macro forces
are working against you the best thing to do is focus on creating value even
if that value isn't yet acknowledged by the market. Have a plan and stick to
it as best you can and focus on what you can control. In our case that has
been continuing with our exploration initiatives and develop the mine to
fast track into production.
GBC AG: How does the rise in gold price influence your overall strategy for
Desert Gold Ventures, particularly with regard to attracting investors and
achieving production in the short to medium term?
Jared Scharf: At the moment there is a huge disconnect between the value of
our gold ounces in the ground at roughly $10 market cap per ounce and the
spot price of gold at $2,500. My intention is to realize that value
disconnect for our shareholders by mining those ounces. I believe as the
bull market in precious metals matures, assets like ours will become more
valuable which will make it much easier to attract capital in both the
primary and secondary markets. From an economic perspective, a higher gold
price means better margins which will no doubt positively impact the results
of our mine study which will hopefully be finished before year end. The
improved political situation in Mali should also help.
GBC AG: Can you provide an update on Desert Gold Ventures' exploration
results and how they may contribute to the broader gold production capacity
in Mali?
Jared Scharf: Even though the investment climate has been tough in Mali
recently, we were still able to do a small 3,500 meter drill program in
2023. Results are still pending for roughly half the program. Initial
results came out a month ago and were encouraging and supportive of our
mining plan. I look forward to releases the next set of results and mine
plan before year end.
GBC AG: With investor sentiment improving due to Mali's proactive stance on
mining, how do you plan to leverage this optimism to secure further
investment or strategic partnerships for Desert Gold Ventures?
Jared Scharf: To be honest with you I've seen many jurisdictions fall in and
out of favor over the years. Mali has been out of favor for several years
now, but it wasn't always that way and now this is changing again. The work
we do as a company does not change regardless of sentiment. The audience
just becomes more receptive to our value proposition. Investors are
opportunistic and I think they are seeing the opportunity in Mali because
stock prices have been hit hard. The upside is obvious in the context of the
gold market and improving situation in Mali.
GBC AG: Given Desert Gold's strategic location alongside major industry
players like Barrick, Endeavour, B2Gold, and Allied, how does this
geographical positioning provide a competitive advantage for Desert Gold
Ventures? Do you see this proximity influencing your future development
plans or potential partnerships?
Jared Scharf: Yes, there are strategic advantages to our project location.
There is the potential to leverage existing mining infrastructure close to
us. Endeavour Mining and Allied Gold's mining infrastructure is close enough
to several of our deposits to look into possible JVs like toll milling etc.
M&A is always more compelling for companies already operating in the
district of their target.
GBC AG: Finally, how do you see Desert Gold Ventures evolving in the next 5
to 10 years? What role do you envision your company playing in the Malian
gold sector, and how will you differentiate your strategy from other players
in the region?
Jared Scharf: At the moment we are sitting on 1.1 million oz resource at our
SMSZ project. There are 28 gold zones on the property and only 5 of them are
incorporated into the existing resource. We will be updating the resource as
part of the mine study and I'm hopeful we can incorporate additional
resources from a new zone called Gourbassi West North. But the point is
there are obvious ways to grow our current resource base. Ultimately what I
envision for our SMSZ project is an emerging mining district within the
Kenieba Window of Western Mali/Eastern Senegal. Our mine study envisions the
development of two initial open pits to start. With continued exploration
and development over time I believe we will bring on many more. Hopefully
once we start mining in this area we'll continue to do so for the next 30
years unless of course our shareholders are offered something better!
GBC AG: Thank you for the interview.
GBC conclusion from the research report: Desert Gold Ventures Inc. presents
in our opinion an attractive investment opportunity due to its strategic
location in a rich gold region, a significant resource base, and ongoing
exploration efforts. The company's SMSZ Project in Mali covers 440 km² along
a prolific gold zone and contains over one million ounces of gold. The
planned 30,000-meter drilling program in 2024 aims to expand resources and
identify new targets.
The Kenieba Window, part of the Birimian Greenstone Belt, is known for
high-quality gold resources averaging 2.22 g/t and substantial market
valuations. Recent acquisitions in this area have averaged 1.81 million
ounces of gold at $66 per ounce. Desert Gold Ventures' SMSZ Project, with
1.08 million ounces of gold at 1.14 g/t and valued at $9 per ounce,
represents a notable opportunity. The project's current market cap is about
$10 million, but it could be valued at $71.4 million based on recent
acquisition prices. After accounting for warrants and options, the equity
valuation is $69.5 million. Due to Desert Gold's lower average grade
compared to peers, a 50% discount is applied, resulting in a valuation of
$35 million, or $0.155 per share. As the grade improves, the valuation is
expected to increase.
The company is also exploring the feasibility of a small heap leach mine,
which could potentially generate substantial cash flow. Preliminary
assessments suggest the mine could produce 15,000 to 20,000 ounces per year,
with a potential annual free cash flow of $20 million. With a 70% discount
applied to this project's valuation, its contribution is $0.101 per share.
Incorporating this with the overall valuation, our target price is $0.311
per share. Given the significant upside potential, we rate the stock as a
BUY.
You can download the research here: http://www.more-ir.de/d/30815.pdf
Contact for questions:
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Completion Date (Time): 18.09.2024, 9:00am
First Distribution Date (Time): 19.09.2024, 6:00am
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1990829 19.09.2024 CET/CEST
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