Torex Gold — Investing Ideas
Torex Gold (TXG; www.TorexGold.com)
Torex Gold (TSX:TXG) is a gold company with one operational mine in Mexico. Its market capitalization — the value of all of all of its shares combined — is $1.2 Billion Canadian Dollars.
Let me tell you something: I like this company (and have invested in it). The company regularly mines over 100,000 ounces of gold every quarter. This production level (>100kOz / Quarter) is forecast to continue into Q4 2023 before dropping marginally. In turn for this gold, Torex is provided with lots of cold hard cash.
The financial ratios are also remarkably low. Price/Cash-Flow is ~2x, Price/Book is around 1, and Price/Sales sits around 1 as well. That makes Torex stock super cheap in almost anyone’s book!
To paraphrase one comment which I read on the yahoo conversations board — the market is acting like Torex’s mine is built on an active volcano which is about to explode. This is only a way of saying that there is operational risk — and market participants know it.
See, at this point, Torex is just a one trick pony. It only has the one mine site in Mexico — El Limón Guajes (ELG). But the company has set its hopes for the future on another site on the same property named Media Luna. The plan is to transition the mining from the current site — ELG — to Media Luna starting in Q1–2024 . The company, from what I can tell, will live or die on the basis of Media Luna’s viability.
The Brass Tacks
From what I can see, there are two moving pieces to this stock. One positive, one negative.
Positive: On the one hand, we have an excellent value proposition. A productive gold mine, a purportedly good relationship with the local people, cash on hand nearing $200mm, low debt.
Negative: On the other hand, we have a big issue if Media Luna doesn’t pan out. Huge. The company has spent eons talking about Media Luna, and will presumably spend a lot of money developing it. There are many things that can go wrong with a new mine, the biggest being going over budget and taking too long.
A Media Luna feasibility study “with completion scheduled for Q1 2022″(TorexGold.com) is currently underway. This is a highly significant de-risking milestone which could have a material impact on the stock price.
If you want to know more about Torex’s operations I recommend these articles by Taylor Dart on SeekingAlpha.com. I would also recommend looking at this article at SeekingAlpha.com.
This company fits with this sites’ philosophy of delivering value investments to my readers. Torex, from a financial perspective (balance sheet, cash-flow, low debt) fits the bill. The question is whether you, reader, have the risk appetite for Torex.
Thanks for reading this article, Happy Investing.
Originally published at https://www.investingideas.ca on September 22, 2021.
