The recent increase in gold price hasn’t brought much joy for Superior Gold (TSXV: [stock_market_widget type=”inline” template=”generic” color=”default” assets=”SGI.V” markup=”{symbol} {currency_symbol}{price} ({change_pct})” api=”yf”]) investors, who have seen the value of their investment decline over 31% this past year. That’s not surprising as the Toronto-based company has consistently missed the market’s earnings expectations by substantial margins over the past four quarters.
But investors looking for an early-stage gold company should pay close attention to Superior Gold as it has the potential to turn around in 2019. Let’s see why.
Superior’s Gold Production Profile Set to Increase
Superior is the 100% owner of the Plutonic Gold operations in Western Australia. Plutonic Gold consists of three operations: the Plutonic Gold mine and central mill, the Hermes open-pit gold mine, and an earn-in option in the Bryah Basin joint venture, where it will hold up to an 80% interest in mineral rights once the earn-in is complete.
According to the latest update, Superior produced 20,541 ounces during the fourth quarter of 2018 and 90,101 ounces for the entire year. For comparison, the company had produced 20,197 ounces during the fourth quarter of 2017, while its annual production was 80,143 ounces. Superior attributes the increase in its 2018 production to record levels to the “successful completion of construction at our second mine—Hermes, which was built on time and on budget in 2018.”
Superior could have achieved higher production last quarter, but unforeseen repairs on a crusher, issues pertaining to equipment availability, and power interruption due to a weather-related event hurt its output. However, the company claims that it has addressed all of these concerns.
Additionally, Superior Gold claims to have made some changes to its site operations team of late, which enhanced the underground stope grade by the time the quarter ended. Given these developments, it won’t be surprising to see an improvement in Superior Gold’s output this year.
Now, the company hasn’t provided its 2019 guidance yet, which investors can expect on March 12 when the complete set of results is released. But analysts are probably anticipating an upbeat outlook from Superior Gold as the estimates suggest. Its adjusted earnings are expected to rise to $0.09 per share this year as compared to a loss of $0.07 per share in 2018, while revenue is expected to spike nearly 24% year over year.
It is likely that Superior will be able to achieve these numbers not only because of higher production but also due to an improving gold pricing scenario.
Gold Price Serves As Catalyst for Stock Price Increase
Gold prices have inched up nearly 8% in the past three months, with the yellow metal now trading at more than $1,300 an ounce. It is expected that gold will hold this level this year and possibly go up to $1,375 an ounce according to one estimate.
That would prove to be a solid tailwind for Superior as gold prices averaged $1,268 an ounce in 2018. A combination of stronger production and better pricing will allow the company to ramp up its financial performance by a big margin, which could give the stock a nice shot in the arm going forward.
