Trans-Siberian Gold Share Price (TSG)

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IC View
Trans-Siberian Gold has waste piles at Asacha with 3-4 grams per tonne (g/t) of gold in them. This is higher than many orebodies at profitable mines. In the Asacha mine itself, the grade hit an average of 9g/t in the last three months of 2018, and this has continued into 2019. The combination of the dividend, handed out when it can be afforded (hence the lack of forecasts in our table) and the expansion prospects at Rodnikova means this is both a growth and income play. Despite the hefty recent gains, Trans-Siberian still has a forward price/earning multiple of eight, compared with fellow Aim gold plays Hummingbird Resources (HUM) on 11 and Shanta Gold (SHG) on 13, according to Capital IQ, which shows there is room to grow as it ups production. Buy

IC Tip: Buy at 75.5pp

Tip style
GROWTH
Risk rating
HIGH
Timescale
MEDIUM TERM
Bull points
Gold exposure
Weak rouble
Earnings growth
Costs declining
Bear points
Ownership structure
Asacha mine life
By Alex Hamer
Trans-Siberian Gold (TSG) has been ticking along since 2003 on Aim, quietly bringing a mine into production and putting out 40,000 ounces (oz) of gold a year and paying a dividend.

TSG:LSE
Trans-Siberian Gold PLC

1mth
Today change
0.00% Price (GBP)
80.00
Its modest presence in London can be linked to UFG Asset Management’s historic 86 per cent holding, as the Moscow-based fund kept Trans-Siberian afloat by turning debt into equity, having provided the cash needed to get its Asacha mine up and running in 2011.

But the company has acted to improve the shareholder structure with a debt-funded 33p share buyback earlier this year to take UFG's stake down to 77 per cent. The company says it’s comfortable with net debt levels following the buyback. The price of the buyback, after a substantial recent run, took place at a noteworthy discount to the market price.

Given the shares' recent performance, it might look as though the horse has bolted, but this move started before the gold price rose to over $1,400/oz and the company’s production looks as though it will continue creeping up at lower average costs. And for gold bulls, an important factor is that high but falling costs at Trans-Siberian's Asacha mine means profits are highly sensitive to further gold price increases.

In the 2018 results, Trans-Siberian published its all in sustaining cost (AISC) for the first time. Asacha was pricey in 2017, with an AISC of $1,341/oz, compared with an average realised gold price of $1,260/oz. TSG still made a pre-tax profit of $3m that year and handed out a final dividend of 2.1¢ per share. The overall cost figure fell to $1,049/oz in 2018, despite $18m of sustaining capital, largely going to a new pumping station to keep water out of the underground mine.

Chief executive Alexander Dorogov told us AISC would fall further in 2019 thanks to a new energy rebate from the regional government, which hands the company back 70-80 per cent of its fuel costs. A weak rouble should help, too.

Additionally, there is an expansion option in the Rodnikova deposit 50km down the road that could see gold production increase to 100,000 oz a year. Funding requirements from any expansion should be kept down because the proximity of the project to Asacha means expensive new plant is not needed for it to go into production. Trans-Siberian previously owned the project but handed it back to the state five years ago because it couldn’t afford exploration.

Trans-Siberian Gold (TSG)
ORD PRICE: 75.5p MARKET VALUE: £83m
TOUCH: 76.0-75p 12-MONTH HIGH: 80.9p LOW: 32.1p
FORWARD DIVIDEND YIELD: FORWARD PE RATIO: 8
NET ASSET VALUE: 95.4? NET DEBT: 7%
Year to 31 Dec Turnover ($m) Pre-tax profit ($m)* Earnings per share (?)* Divi

New presentation out this week! The company are on a roll at the moment.

Supportive, long-term shareholders: Majority owned by UFG Asset Management (86.4%)
Beating expectations: Record production of 46,053 oz of refined gold in 2018
Revenue of $59.8m in 2018, $43.4m in 2017
High yield stock: $18.5m in dividends paid 2016-2018. 2019 special dividend of $5.7m paid in Fed 2019.
Approved 21% share buyback
Robust corporate governance
High grade mine: 7.4g/t average in 2018 (8.8 g/t average in Q1 2019)
Rosnedra approval for mining license extension 6 years. Recent award of Rodnikova licence
Low energy costs due to Far East Russia subsidies

I've held TSG for years and I always remember looking at the prices beyond a pound that the BOD have options, which to me seemed like their long term market cap and SP value aims. It's never taken much to move the SP here. If these large round numbered trades are related to this buyback policy, then I can't help but think this will shift pretty quickly in the next few months, especially with the dividend levels being announced and the good practice being shown in announcements. It also strikes me that with high prices and more liquidity, it provides the chance for larger shareholders to sell and realize profit, which I think I will also consider at such a time.

Shareholder approval for Buyback

Trans-Siberian Gold plc (TSG.LN), a low cost, high grade gold producer in Russia, is pleased to announce that the proposed Buyback of shares from UFG Private Equity Fund l, L.P and Destin Investment Management Limited has been approved by its shareholders.

The Resolution to approve the Buyback was duly passed at the Company's General Meeting held at 11.00am today.

Capitalised terms used in this announcement have the meanings given to them in the Circular issued by the Company on 23 May 2019. This document is available on the Company's website at http://www.trans-siberiangold.com/.

The market likes it! Also a senior management appointment release