Q3 Financials Highlight Progress in Gold Mining and Exploration

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Soma Gold Corp. (TSXV:SOMA; OTC:SMAGF; WKN:A2P4DU) has announced its financial and operational results for the third quarter. The company reported revenue of US$22.4 million for the quarter and US$64.4 million for the nine months ending on September 30, 2024. Quarterly EBITDA stood at US$9.1 million, contributing to a year-to-date EBITDA of US$22.7 million, equivalent to US$0.25 per share.

During Q3 2024, Soma sold 6,612 gold-equivalent ounces (AuEq), with total sales reaching 20,845 AuEq ounces for the nine months. The company reported total cash costs per ounce of gold sold at US$1,256 for the quarter and US$1,261 year-to-date, with an average realized cash margin of US$1,272 per ounce for the quarter.

Gold production totaled 6,639 AuEq ounces for Q3 and 20,565 AuEq ounces year-to-date, reflecting a decrease compared to 25,106 AuEq ounces produced in the same period in 2023. Operational challenges, including a blockade by the local community, impacted output during Q3. This blockade, which lasted eight days, stemmed from delays in road improvements. The disruption reduced production by approximately 750 ounces. Soma resolved the issue, and normal operations resumed in July.

Soma's operational focus for the remainder of 2024 includes advancing exploration efforts along the Otu fault, completing development work in high-grade zones at Upper Cordero and the Venus Gap, and progressing the restoration and permitting of the Machuca mine for production in Q4. The company is also finalizing plans for the Nechi mine, with mining operations expected to commence by 2026.

CEO Geoff Hampson spoke about Soma's growing cash reserves as capital-intensive projects near completion, stating in the press release, "We are pleased with the financial performance this quarter, which remained on budget. Cash resources are growing as capital-intensive projects wind down, although gold production was lower than expected due to external and operational factors. The blockade in Q3 by the local community, which stemmed from frustration over the pace of road improvements promised by the Municipality of Zaragoza in cooperation with Soma, restricted access to the company's Cordero Mine and El Bagre Mill. The issue was resolved, and the blockade was lifted after eight days. The shutdown halted both operations, reducing gold output by approximately 750 ounces. In addition to the lost production, the average head grade was lower than expected due to narrower and fragmented veins causing higher dilution and a lower-than-historical average grade. The unplanned development work required to access the higher-grade zones in Upper Cordero and the Venus Gap (as detailed in Soma's news releases dated July 16, 2024, and November 12, 2024) also added to costs and increased waste. This development work is now largely complete, and production from these areas is expected to begin in Q1 2025."

A Golden Market

Articles and analysts have suggested that the gold market is entering a pivotal phase, with potential revaluation scenarios being discussed amid significant global economic changes. Citizen Watch is one such outlet that highlighted that on November 30. The site listed three critical factors driving this trend: skyrocketing national debt, global de-dollarization, and increased gold accumulation by central banks. The article noted that gold remains at the forefront of economic discourse, supported by its resilience and historical significance as a store of value.

Citizen Watch showcased a recent social media report from GoldSilver HQ, which projects that moderate revaluation could elevate gold prices to US$3,000–US$5,000 per ounce if central banks continue to boost reserves. In scenarios of significant currency devaluation, gold could surge to US$7,500–US$10,000 per ounce. Hyperinflation in key economies may push these valuations even higher, with estimates of US$20,000–US$50,000 per ounce. In an extreme theoretical model where the global M1 money supply is backed by gold, prices could exceed US$100,000 per ounce.

Egon von Greyerz, Founder and Chairman of Matterhorn Asset Management, on November 26, pointed to the growing gold demand from Eastern and Southern central banks that could dramatically impact gold prices due to the limited annual production of approximately 3,000 tonnes. Von Greyerz asserts that gold remains significantly undervalued compared to fiat currencies and other financial assets, predicting substantial upward price movements in the coming years.

Further bolstering the case for gold, Adam Hamilton of 321 Gold noted on November 29 that gold's market fundamentals remain robust. Following the recent U.S. election, gold demonstrated resilience, quickly recovering from an initial selloff. Hamilton attributes this to shifting investor sentiment, with slower-than-expected Federal Reserve rate cuts under the incoming administration fostering a favorable environment for gold.

The Forces Driving Soma Gold

Soma Gold's strategic initiatives position the company for significant growth in the coming years. According to its August Investor Presentation, the company is targeting a production rate of approximately 85,000 ounces of gold annually by 2028. This is supported by expanded milling capacity and resource development. Current operations are ramping up, with milling capacity expected to increase to 500–550 Tons per day (TPD) in 2025 and to 1,400 TPD by 2028.

The Cordero mine, a key asset in the company's portfolio, features an average life-of-mine diluted head grade of 7.4 grams per tonne (g/t) and is undergoing resource expansion and deposit extension drilling. Exploration in the Otu Valley has identified multiple high-priority targets, with additional drill rigs contracted to accelerate resource growth.

The company's ESG efforts, including formalizing artisanal miners and generating renewable hydropower onsite, have garnered recognition. Soma has won environmental performance awards and maintains strong relationships with local communities, enhancing operational sustainability. =

In addition, the recently restructured subordinated note terms provide Soma with financial flexibility to prioritize exploration and resource expansion, reducing the immediate cash burden and supporting its growth strategy. These developments, coupled with stable operations at its El Bagre and El Limon mills, underpin Soma's efforts to achieve production and profitability targets.

Ownership and Share Structure

Headquartered in Vancouver, B.C., Soma Gold Corp. has a market cap of US$40.19 million and trades in a 52-week range of CA$0.30 and CA$0.74. As of September 30, 2024, it had CA$3.0 million in the bank, with a monthly exploration budget of CA$330,000.

As a profitable company, it has no burn rate.

According to Reuters, 67.45% of the company is held by management and insiders.

CEO and Chairman Geoffrey Hampson has 17.17% and 0.56% through his wholly owned companies Hampson Equities Ltd. and Lake Forest Development Corp., Vice President Jean-Francois Meilleur has 0.52%, Director Glenn Walsh has 0.31% directly and 44.07% through his wholly owned company, Conex Services Inc., and CFO Greg Hayes has 0.12%.

A further 0.70% of control is vested in institutions.

Palos Management Inc. has a 0.27% stake, and Marmite Capital AG has one comprising 0.33%. Strategic investor Eric Sprott owns 750,000 shares bought in a private placement (0.82%).

2.26% is with strategic investors.

The rest is with retail investors.