Australian gold explorer Dacian Gold Ltd [ASX:DCN] opened down 1.29%, to $1.92, this morning. Since then, the stock has traded back up to $1.94, but is still down more than 5% year-to-date.
What happened to the Dacian Gold share price?
Dacian announced another step towards developing their 100%-owned Mt Morgans Gold Project. They’ve issued a conditional Letter of Intent to GR Engineering Services Ltd [ASX:GNG].
What is their intention?
Construct a 2.5-million-tonne per annum carbon-in-leach treatment facility. ‘This follows hard on the heels of the recently announced fully underwritten $110 million equity raising,’ Dacian’s chairman Rohan Williams said.
The $110 million ‘now completes the financing required for the construction of’ the Mt Morgans Project. GR Engineering would be responsible for engineering, procurement and construction at the site. ‘The GRES team know the Mt Morgans project well,’ Williams said.
‘…they have a strong understanding of our culture and objectives. They represent an excellent fit for us, and we are looking forward to working closely with them as we begin construction of the project in the coming weeks.’
The treatment facility plant will be on the eastern half of the 640km-square site. It will be one of two key ore sources for the project. Dacian also has two underground gold mines at Westralia to source ore.
Shareholders will receive more updates over the coming weeks.
What now for Dacian Gold Ltd?
Is this the time when you rush out and buy Dacian shares?
It depends on what production might look like. The company has greatly increase their market cap over time. From the start of 2016, Dacian has climbed 145.57%. And they are yet to generate revenues from operations.
In FY16, the company made their biggest loss, $21.83 million. To justify their share price, Dacian will need to generate profits of around $25 million.
If they issue no more shares, profits of $25 million will give Dacian an earnings-per-share (EPS) figure of 13.83 cents. And it will also give the company a price-to-earnings ratio of 14-times earnings.
At the moment, Dacian has an EPS loss of 17 cents. It’s safe to say the company still has a lot to do. And a lot of it will likely depend on production.
Junior Analyst,Markets and Money
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