Theta Gold Mines targets early 2027 production for reborn South African gold field

Theta Gold Mines remains undervalued despite the potential for early gold production from its 6.1Moz Transvaal Gold Mining Estates project.

Near term gold production is on the cards for Theta Gold Mines. Pic: Getty Images

Special Report: Theta Gold Mines has a hell of a lot going for it with an impressive 6.1Moz resource at its Transvaal Gold Mining Estates project, with a new presentation outlining its plan to bring the historic gold field into production by 2027.

• Theta Gold Mines aims to start production by 2027 at its 6.1Moz Transvaal Gold Mining Estates project
• The project is shovel-ready with secured mining rights, targeting cashflow in early 2027
• Production could re-rate the undervalued company

In its latest investor presentation, the company reiterated its focus on restarting underground operations at its previously producing, 74%-owned and shovel-ready TGME project, 370km northeast of Johannesburg.

A decision to mine has already been made, with production due to start by early 2027.

The first stage of underground mining will be sourced from the core Beta, Rietfontein, CDM, and Frankfort mines, all of which are within 40km of a planned central processing plant.

This will in turn deliver cashflow in the first half of 2027, an objective aided by the project being permitted and development-ready with key mining rights secured and infrastructure in place to support scalable, low-cost operations.

The TGME project. Pic: Theta Gold Mines

Under Theta Gold Mines’ (ASX:TGM) 2022 feasibility study, TGME was expected to produce between 80,000 and 100,000oz of gold per annum over a near 13-year mine life at an all-in sustaining cost of just US$834/oz.

Economics under this study remain hugely attractive with pre-tax net present value and internal rate of return – both measures of profitability – estimated at US$324m and 65% respectively while peak funding requirements were expected to be just US$77m.

Where it gets truly interesting is that these already attractive numbers are based on a gold price of US$1642/oz, less than half the current spot gold price of US$3390/oz. 

They now look very conservative, with an updated study due in September 2025 almost certain to deliver vastly superior economics.

Growth potential in South Africa

All this ignores the fact that the initial study only accounts for some 1.1Moz of the 6.1Moz resource, indicating potential for operations to be expanded.

Indeed, the company has a strategy in place to increase production to ~160,000-200,000ozpa within five years of starting production.

While the existing feasibility study covers the Phase 1 surface gold and Phase 2 underground operations, TGM has also worked out a Phase 3 expansion that will see the number of mining production units climb from four up to seven, the metallurgical plant expanded up to 90,000t per month and operations extended to additional mines at Vaalhoek and Glynn’s Lydenburg.

Additionally, the updated feasibility study is expected to include surface gold sources such as rock dumps and tailings that could increase mine life to over 14 years.

The company also touched on South Africa’s attractiveness as an investment destination, noting that it has jurisdictional benefits stemming from English common law and a democratically elected government along with logistical advantages such as having the largest road system network in Africa and local commercial airports.

It has a vibrant mining industry and large, well-trained mining force.

On the ESG front, the company has adopted a multi-stakeholder sustainability development strategy that is based on holistic risk management, conservation of biodiversity and positive impact on host communities amongst other points.

Highlighting this, the company has employed more than 500 people with some 70% of all unskilled employees sourced from the local community.

Valuation

Despite all this, the company continues to trade at a significant discount to its South African/Australian pre-development peers on an EV/resource basis.

Sydney-based equity markets advisory firm RaaS Research Group said in early July that TGM is undervalued, with a major re-rating on the cards if the company enters production as planned.

It noted that TGM trades below both the average and median EV/oz of a 22-company peer group including Native Mineral Resources (ASX:NMR), Black Cat Syndicate (ASX:BC8), Meeka Metals (ASX:MEK) and Magnetic Resources (ASX:MAU). 

Many of its Australian-focused peers will produce significantly less gold at higher costs and are reliant on third-party processing.

Catalysts for TGM include near term operation/cashflows, strong gold price leverage, potential upside from multiple TGME project growth options.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.