Dacian Gold Ltd Edges Closer to Gold Developments

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.

Regards,

Härje Ronngard,

Junior Analyst,Markets and Money

PS: We likely won’t see another turnaround in resources like we did in 2016. And if we do, it could be a long time from now. Unless commodity prices suddenly move higher, earnings will likely stagnate.

That’s why some investors prefer the smaller end of the market.

Smaller miners like Dacian are a riskier investment, there’s no running away from it. But they can potentially grow earnings 10-fold in a short space of time. Resource specialist Jason Stevenson is no stranger to explosive resource stocks.

In his advisory service, Resource Speculator, Jason has made gains of 142%, 145% and 242%.

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Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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