Buy Superior Gold Stock As It Will Fly Higher

Superior Gold [stock_market_widget type="inline" template="generic" color="default" assets="SGI.V" markup="(TSXV: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] came into 2019 with high hopes that it would be able to build on its solid production profile and deliver more stock upside, but the year has turned out to be a really bad one for the company so far. Superior Gold stock is now in penny stock territory after losing nearly 45% of its value so far this year.

So what went wrong for this early stage gold company, and will it be able to make a comeback in the coming months? Let’s find out.

A Closer Look at the Operations

In the first quarter of 2019, Superior produced 22,474 ounces of gold, an increase of 17% from the prior-year period. The increase in Superior Gold’s production was a result of accelerated development at its mines.

Superior Gold pointed out that the company witnessed a 10% increase in the grade of stope and development ore during the quarter. What’s more, the grade of the surface material processed by Superior increased nearly 30% during the quarter.

Thanks to the higher grades, Superior was able to reduce its costs from the prior-year period. The company delivered total cash costs of $1,145 an ounce as compared to the year-ago period’s figure of $1,227 an ounce, representing a decline of nearly 6.7%.

All-in sustaining costs, meanwhile, fell to $1,246 an ounce as compared to $1,421 an ounce in the prior-year period, a drop of more than 12% over the year-ago period. As such, Superior Gold was able to offset the lower gold prices it experienced during the quarter.

Superior Gold saw an average realized gold price of $1,305 an ounce in the first quarter of 2019, down from the prior-year period’s figure of $1,331 an ounce.

So, as far as the operations are concerned, Superior Gold did extremely well last quarter. This is probably the reason why the stock price has started picking up the pace in recent weeks. In fact, Superior Gold stock is up more than 9% in the past month, and don’t be surprised to see this momentum continue.

A Bright Outlook

Superior Gold management highlighted in the press release that the company is witnessing further improvements in its grades:

We continue to focus on improving the underground stope grade and maximizing free cash flow generation. This improvement continued into the second quarter as the stope grade for April averaged more than 3.50 g Au/t (which is an increase of more than 25% compared to the first quarter).

Thanks to the higher grades, Superior Gold will have to mine less waste tonnage, and this will increase its profitability. As a result, the company should be able to deliver stronger top and bottom lines going forward.

This is exactly what analysts expect. According to Yahoo Finance, Superior Gold’s revenue will increase nearly 20% next year and the company will post a profit of $0.11 per share as compared to a loss of $0.01 per share this year. For 2019, Superior is expected to reduce its losses by a big margin as well.

So it would be a good time to buy this stock because it has the potential to fly higher.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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