Torex Gold Resources (TXG.TO)

Trades at discount to NAV. Great move in past year. Mine in Mexico hitting end of useful life; moved to different mine on same property, brought it into full production without missing a step and already generating FCF. Found new assets underground, including copper. 

Still likes gold, though it's pulled back from highs. Central banks are still long-term buyers who will continue to add to diversify reserves and get away from the USD and fiat currencies in general. Yield is 0.99%.

Has traded at a big discount to the group for a long time, then made a big move the past year. One Mexican mine is shutting down naturally, but will be replaced by another mine, so they aren't losing production levels. Have extended reserves overall to maintain production mid-2030s. Are generating free cash flow and trades at a discount to NAV.

Trading ridiculously cheaply as one pit was running out. However, a new mine (70% gold, 30% copper) came in on time and on budget and has taken reserves into 2038. So they won't miss a step in production. Still at a big discount to the seniors.

TXG is a small-cap gold producer with assets located in Mexico. TXG has generated decent cash flow over the last few years with strong organic growth. The company has been reinvesting heavily back into the business through capital investment. Therefore, TXG does not pay any dividends or repurchase shares yet. The company has been on really strong momentum recently, given the tailwind from high gold prices and strong operating results.

In Q4-2024, TXG reported good results; the company managed to achieve annual production guidance for a sixth consecutive year. TXG produced 452,523 ounces for FY2024, which was within the already upwardly revised guidance range of 450,000 to 470,000 (previous guidance was 400,000 to 450,000 oz). TXG reported an EBITDA of $154M, an 8% growth from last year of $142.6M. TXG has a strong balance sheet with minimal net debt and is currently trading at 9.4x Forward P/E. With solid momentum and a strong gold price, we think TXG’s risk/reward at the current price is attractive.
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This name is further down the food chain. Take a look at the more interesting mid-size players. Still, he's been lightening up on gold. With a strong USD, and interest rates possibly being higher, gold may take a few steps back. So he's waiting to see how things shake out.

Expecting further gains from gold. Gold stocks have not followed run up in gold, which presents buying opportunity. Discount to net asset value, and low cash flow multiple good for margin of safety investors. Mines located in Mexico have a lot of opportunity - lots of gold to produce. Expecting to maintain ~450,000 ounces of gold production going forward. 

At 5X earnings, TXG is very cheap indeed. While it is down 7% in 2023, it is still up 55% over 52 weeks, so may just be consolidating prior gains. Revenue is ramping nicely; EPS is being impacted by inflation and other factors and is expected to decline in 2024. The last quarter was ahead of estimates, but estimates have been ticking down. It has $320M net cash so is in excellent financial shape. Cash flow generation is good. We think it is certainly attractive on valuation, and its cash helps provide some comfort. We would see it as buyable. 
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One mine is winding down, but another is ramping up production. Well funded, cash on the balance sheet. No debt. Trading at 3-4x operating cashflow. He took profits when it ran up.