Research Note - Signal Gold Inc. (SGNL:TSX,$0.50|BUY $2.10 TARGET) Point Rousse Cashflows Beginning To Roll In – More To Com

This morning, SGNL reported Q2/22 financial and operating results from the Point Rousse operation. As previously reported on July 19th, the Point Rousse operation had a breakout quarter despite the water management issue effecting production in April. From a financial standpoint, the operation also had a dramatic turnaround with costs decreasing significantly and generating its first sizable cashflows in over a year. We expect both the production and cost profile for H2/22 to continue to improve as mining from the Argyle pit is ongoing until Q1/23. Additionally, by Q1/23, the Company will begin mining from the Stog’er Tight open pit where we anticipate a similar production and cost profile throughout 2023 and into 2024. The cashflows generated over the next six quarters should provide more than enough non-dilutive capital to support the continued development of the Goldboro Project.

Cash costs for the quarter came in at US$1,032/oz vs. our estimate of US1,111$/oz and AISC was US1,498$/oz vs. our estimate of US$1,507/oz. Gold sold was 4.1 Koz in Q2 generating revenue of $9.7M. The Company reported operating cashflow of $2.5M vs. our estimate of $1.6M.

We are maintaining our BUY rating and our $2.10/share target price for SGNL.

Despite the Q1 struggles due to the water treatment issue in the Argyle Pit, management has iterated that the Company will achieve the lower end of its 2022 guidance which will provide enough non-dilutive cashflow to support the Goldboro project development and exploration until a construction decision is made and mine financing is secured.

As of June 30th, 2022, SGNL had a cash balance of $10.9M and additional available liquidity of $3.0M from an undrawn revolving line of credit facility.

2022 Guidance: As previously reported, SGNL released production guidance for 2022 of between 21.5 and 23.0 Koz Au reflecting a record year of production. In addition to 2022, we expect SGNL to produce gold at record rates into 2023 and 2024 as the Company continues to advance and develop the Stog’er Tight deposit. The Company also released guidance for the full year operating cash costs to be between US$980/oz and US$1,060/oz.

20220805 - SGNL - Q2 Financials
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