On Monday, BMO Capital Markets maintained its Outperform rating and Cdn$35.00 price target for Torex Gold Resources (OTC:TORXF) shares (TXG:CN) (OTC: TORXF) despite a temporary production stoppage. The suspension of operations at the ELG Underground mine follows a recent incident resulting in three fatalities.
While the stock has declined nearly 9% over the past week according to InvestingPro data, it maintains an impressive 73% gain year-to-date. The firm has updated its fourth-quarter estimates to account for an anticipated two-week disruption in production.
The analyst at BMO Capital has adjusted the production forecast for Torex Gold to 448 thousand ounces (koz), which aligns with the lower end of the company's 2024 guidance. Although operations at ELG Underground have been halted for investigation, the company's guidance for the year has been reaffirmed.
With a solid financial health score rated as "GREAT" on InvestingPro and a market capitalization of $1.64 billion, the company appears well-positioned to manage this temporary setback. The analyst noted that the current situation is not expected to significantly affect the schedule for the Media Luna project.
The temporary suspension at the ELG Underground mine is due to the tragic event that took place recently, which is now under investigation. BMO Capital has incorporated a two-week production loss into Torex Gold's quarterly estimates following this development. This adjustment reflects the immediate operational impact of the suspension on the company's output.
The analyst emphasized that while the production forecast has been revised, the overall outlook for Torex Gold remains positive. The firm will continue to monitor the situation and provide updates to its estimates as more information becomes available regarding the resumption of operations and the investigation's findings.
In summary, BMO Capital Markets has reiterated its positive stance on Torex Gold Resources, with no change to the price target, despite a temporary setback in production. Trading at a P/E ratio of 13.2 and showing strong profitability with $124.6 million in net income over the last twelve months, InvestingPro analysis suggests the stock is currently undervalued.
The firm awaits further details to refine its future estimates accordingly. Discover more insights and 6 additional ProTips for Torex Gold through InvestingPro's comprehensive research reports.
In other recent news, Torex Gold Resources Inc (TSX:TXG). had a strong third quarter in 2024, producing 119,000 ounces of gold, bringing the year-to-date total close to 350,000 ounces. This production, paired with a record average realized gold price, drove quarterly revenue to $314 million.
The company's all-in sustaining cost (AISC) was just over $1,100 per ounce, resulting in a 52% AISC margin. Torex Gold is on track to meet its production guidance for the sixth consecutive year, supported by the Media Luna project, which is 87% complete.
The company anticipates a production rate of at least 450,000 ounces of gold equivalent annually through 2030. However, open pit mining activities are winding down, potentially increasing maintenance costs and decreasing efficiencies.
The transition of open pit miners to the Media Luna underground mine may also incur additional costs. Despite these challenges, Torex Gold maintains a strong financial position, with a cash balance of $115 million, and plans to return to positive free cash flow by mid-2025.
The company continues to engage in discussions with the Sheinbaum administration in Mexico about infrastructure and foreign investment, demonstrating its proactive approach in navigating the evolving landscape of the gold mining industry.
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