CA - Assessing Dundee Precious Metals' Osino Acquisition Setback And Prospects At Coka Rakita

2024-05-11 12:39:26 ET

Summary

• Dundee Precious Metals is a highly undervalued gold miner with excellent management and low costs.
• In the next few years, it will face the challenge of declining production from its Bulgarian assets.
• The failed acquisition of Osino, which would have allowed to compensate the loss of Ada Tepe in 2026, is a setback.
• However, the recently released PEA for its Coka Rakita deposit has confirmed this is a very high-quality asset, capable of average production of 130,000 ounces per year at $715 per ounce.
• The margin of safety is significant, with the NPV of Coka Rakita alone equaling the entire company's enterprise value at current spot prices.

I have covered Dundee Precious Metals (OTCPK: DPMLF , TSX: DPM :CA) in the past in a number of articles, most recently here in January. Dundee is one of my core holdings among gold miners, because of its excellent management, operational outperformance, low costs, recent exploratory success, and growth opportunities. Despite being one of the best performing gold miners over the last five years, it remains highly undervalued. The company has a market capitalization of around $1.5 billion, $600 million in cash and no debt. It is guiding for production of around 245 thousand to 285 thousand ounces of gold in 2024, at all-in sustaining costs (AISC) sub-$1000 per ounce ($790-$830 per ounce). This means it should easily be able to generate in excess of $250 million in free cash flow per year at current gold prices. This would give it a forward FCF yield of around 30%....

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