Share to Buy: Alacer Gold Corp (AQG)

Alacer Gold (AQG) is a gold producer with operations in Turkey and Australia, and was formed through a merger between Anatolia Minerals and Avoca Resources in February 2011.

AQG’s sole asset is its 80%-owned stake in the Turkish-based Coplar project. The group sold its Australian-based Higginsville operation last year.

Gold price

Gold has enjoyed a positive start to 2014, with futures prices up approximately 10% in the year to date.

Below we graph the trend in the price of gold (green line), along with the total bullion holdings in global exchange traded funds (white shaded line).

Source: Bloomberg

As we can see, ETF bullion holdings have stabilised around 56 million ounces and in a bullish sign, gold recently broke through a downtrend resistance line (red line).

The market has already priced in stimulus tapering from the US Federal Reserve (Fed).

However the recent weak trend in US economic data and Chinese manufacturing activity has stoked concerns over slowing global growth, boosting the safe-haven appeal of gold.

Quarterly production

Copler output is growing strongly, with production totalling a record 216,850 ounces (oz) in 2013 – up 44% on 2012.

The positive trend in cash costs also strengthens the earnings outlook. AQG’s December 2013 quarter cash costs were $865/oz, with the group forecasting 2014 cash costs of $730/oz – $780/oz.

The compares favourably to bigger miners Newcrest Mining ($1003/oz) and PanAust (US$964/oz) and is only marginally higher than Regis Resources ($744/oz)

With gold prices having steadied and appearing to head higher in 2014, growth in AQG’s cash margin bodes well for profitability even after accounting for the forecasted lower production.