Gold – Dakota G: Remains a unique proposition
US-listed gold developer Dakota Gold has been one of our top picks. The company finally published its Initial Assessment with Cash Flow, akin to a scoping study, for its flagship Richmond Hill gold project in South Dakota. This is a 6Moz Au heap leachable resource. The grade and mineralogy are similar to those of the neighbouring operating Wharf mine, run by Coeur Mining.
We expected this release to be a positive catalyst for the shares, but the economics of the project beat our expectations, particularly on costs. We had modelled AISC in the region of USD 1300-1400/oz – looking at the 2025 guidance of the Wharf mine. Instead, AISC came in at USD 1050/oz; and recoveries at 85% are better than we had expected. Other value drivers were broadly in line. All in all, the NPV of the project is some 50% higher than we had modelled.
A feasibility study is due early 2027.
In our view, Dakota Gold continues to present one of the best risk/reward opportunities on the junior gold equities space, as demonstrated in the chart below. The chart plots the implied gold price discounted in the shares of a cohort of high-quality gold developers and junior producers, and their fair value upsides in a gold bull scenario of USD 3500/oz real gold price, and at a 1.5x NAV multiple. Recall that the NAV multiple for North American gold peers since 1985 indeed averaged at 1.5x.
We should add that even if Richmond Hill is 4y away from production, the significant share price upside today stems from this project alone, while you get for free: 1) the Homestake exploration prospect and 2) a mining legend running the company.
Gold equities peer group fair value upsides in bull-case scenario at 1.5x NAV vs gold price currently discounted in shares (USD/oz)
Source: Asymmetric Research. *Based on WACCs of c8-9% on average.
Recap of Dakota Gold:
Dakota Gold is US-listed gold developer and explorer with cUSD400m market cap, led by mining legend Robert Quartermain who came out of retirement to pursue this endeavour. He owns 7% of the firm. The company is active in South Dakota where it unveiled in February a 6Moz Au heap leachable resource at Richmond Hill, near the operating Wharf mine. Additionally, 2kms away, Dakota Gold has an extensive land package contiguous to the Homestake gold mine which it is exploring (40Moz past production).
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These are our views only and not investment advice. We own shares in Dakota Gold. We have not been paid by the companies for this research nor have they seen it prior to publication.
Appreciate your insights. Are you saying that Dakota can go to $24 plus, given your conditions? Thanks
It is certainly possible to see $24 per share. Companies like that usually overshoot, and it is possible to see even higher prices.
Just wondering if they did the study based on current market price or how old is this research because it mentioned that the market cap is cUSD400m but base on the current data the market cap of Dakota Gold is 455m US dollars not Canadian dollars so that would put the cUSD market cap at cUSD623m.
So, based on the cUSD400m market cap mentioned in this research, the price per share during the study was 3.57 Canadian dollars (market cap divided by shares outstanding), which implies the US dollar price per share was $2.61.
So the return from the chart is about a 620%, which would give a target price of Dakota Gold stock at $18.79 USD and 25.70 Canadian dollars!
Those are the targets you are looking for.
Thank you, and this is excellent work!