'Strong Results' From PEA Could Attract M&A Interest, Analyst Says

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Thesis Gold Inc. (TAU:TSXV; THSGF:OTCQX; A3EP87:WKN) announced it has filed an updated National Instrument 43-101 technical report for the preliminary economic assessment (PEA) for its wholly owned Lawyers-Ranch project in the Toodoggone Mining District of northern British Columbia.

The report was independently prepared by JDS Energy & Mining Inc. of Vancouver, Thesis said and has an effective date of August 30.

The report outlined strong economics for the project with a pretax internal rate of return (IRR) of 46% and a pretax net present value (NPV) at a 5% discount rate of CA$1.99 billion. After-tax IRR is 35.2% with an NPV at 5% of CA$1.28 billion, using US$1,930 per ounce gold and US$24 per ounce silver.

The project "remains robust at a wide range of gold prices from US$1,750 to US$2,500 with after-tax IRR of 28.8 per cent to 52.8 per cent," the company said in a release.

"The 2024 PEA saw a considerable increase in production versus the previous (2022) PEA with a 32% increase in annual average production to 215,000 gold equivalent (Au Eq) ounces, including an average 273,000 Au Eq ounces annually over the first three years, and a 55% increase in life-of-mine (LOM) production to 3.0 million gold-equivalent ounces, extending mine life to over 14 years," the release said.

"We believe the strong results could garner interest from gold producers looking to initiate or expand their presence in Canada," wrote Raymond James Analyst Craig Stanley. He rated the stock Outperform. 

With the current bull market in gold, "the substantial economic potential of the Lawyers-Ranch Project is clear," Thesis President and Chief Executive Officer Dr. Ewan Webster has said.

"As we advance toward key project development milestones, we will continue to explore new targets within our expansive, highly prospective land package. This approach will further enhance a project that is not only straightforward and low-risk but also benefits from high-grade, easily accessible open-pit and underground ounces, combined with proximity to existing infrastructure. This positions the Lawyers-Ranch Project as one of Canada’s most prospective gold projects."

Raymond James Analyst Craig Stanley wrote in an updated research note that the updated PEA includes open pits at both Lawyers and Ranch and an underground mine at Lawyers.

"We believe the strong results could garner interest from gold producers looking to initiate or expand their presence in Canada," wrote the analyst on September 5. He rated the stock Outperform. "We note one Canadian gold developer has already been acquired this year (Marathon) and another acquisition could close next month (Osisko Mining)."

Company in Position for Smooth PFS Transition

Earlier this month, Thesis announced it had successfully finished its 2024 exploration season at the Lawyers-Ranch project. It said comprehensive fieldwork completed there this year provided "critical geological, engineering, and environmental data, further supporting ongoing permitting efforts and positioning the company for a smooth transition into a Pre-Feasibility Study (PFS)" for the project.

Completion of the work was a "key milestone" for the company, Webster said.

"This key work is in preparation for the environmental assessment process and positions us to swiftly transition into the PFS," Webster said at the time. "With a strong PEA already in place and accelerated progress toward (a) PFS and permitting, the Lawyers-Ranch Project stands out as a premier, advanced-stage asset with significant near-term production potential and considerable exploration upside."

After the release of the updated PEA, which combined the Lawyers and Ranch properties in September, Analyst Jonathan Guy, director of mining research for Hannam & Partners, raised its price on the stock from CA$2.04 to CA$2.48, a 230% return from the share price at the time of the report.

"In our view, this sets out a materially more attractive project than Lawyers on a standalone basis," Guy wrote of the PEA.

In its release on Thursday, Thesis said the PEA also offers a low all-in sustaining cost (AISC) of US$1,013 per ounce of gold equivalent and offers a quick after-tax payback of 2 years.

"Significant mineral resource growth potential remains across both Lawyers and Ranch projects," the release said. "The underground mineral resource at Lawyers is still open for expansion at depth, while Ranch mineral resource zones also remain open. Additionally, there are over 20 unexplored targets that hold potential for further discoveries."

The Catalyst: Gold Market Booming

Gold hit a record high of US$2,685.42 in September, and most experts agree its bull market has not ended. On Thursday, the price was very close to that at US$2,678.90 per ounce.

"A drop in Treasury yields helped support gold, as did expectations of interest rates by major central banks," wrote Ambar Warrick for Investing.com. "The European Central Bank is widely expected to cut rates by 25 basis points later in the day."

Goldman Sachs has raised its forecast for gold in early 2025 to US$2,900 from the previous US$2,700, Investing.com reported.

According to Reuters, gold is on-track for its best quarter in four years. The recent rise was "fueled by the U.S. Federal Reserve's half-percentage-point cut and flare-ups in the Middle East," author Sherin Elizabeth Varghese wrote.

Ownership and Share Structure

According to Thesis, about 66% of the company is owned by institutions, and about 4% is owned by insiders. The remaining 30% is retail.

Top shareholders include Franklin Advisers Inc. with 7.82%, Merk Investments LLC with 7.58%, Delbrook Capital Advisors Inc. with 5.5%, Sprott Asset Management LP with 4.63% and Van Eck Associates Corp. with 2.45%. Director Nicholas Stajduhar owns 1.09%.

The company said it has 196 million shares outstanding, 198.9 million fully diluted. Its market cap is CA$156.7 million, and it trades in a 52-week range of CA$1.00 and CA$0.37.