A Sure Thing in Africa: Large Scale Project at Discount Valuation

• Montage Gold's Kone project has 4.3M oz indicated and 300K oz inferred resource, with planned production of 200K+ oz/year over 15 years
• Current market cap of $65M appears undervalued given project fundamentals; company has $12-13M cash
• Project benefits from low strip ratio (<1:1), soft rock (bond index 11), and 200m true width
• Feasibility study due end-2023, targeting environmental permit Q1 2024 and mining permit Q2 2024
• Company exploring satellite deposits to improve economics through higher-grade feed

The Investment Case for Gold in West Africa

The gold mining sector in West Africa continues to present compelling opportunities for investors, particularly in established mining jurisdictions like Côte d'Ivoire. With major producers seeking to replenish reserves and few large-scale discoveries, development-stage projects with significant scale potential are increasingly attractive.

Project Scale and Economics

Montage Gold's flagship Kone project hosts a substantial resource base of 4.3 million ounces indicated and 300,000 ounces inferred. The preliminary economic assessment (PEA) outlines production exceeding 200,000 ounces annually over a 15-year mine life, with production around 250,000 ounces in the first nine years. The project demonstrates robust economics with an NPV of $652 million and an IRR of over 30%.

"We've got a large-scale project around many large-scale projects in West Africa and in Africa as a whole. I see this as an opportunity. We are undervalued," notes CEO Hugh Stewart, highlighting the project's scale advantage in a region where new major discoveries are increasingly rare.

Technical Advantages

Despite moderate grades, the Koné deposit benefits from several key technical attributes that enhance its economics. These include a very low strip ratio below 1:1, exceptionally soft ore with a bond index of 11, and a true width of 200 meters - unusual for West African deposits. These characteristics contribute to lower mining and processing costs.

Financing Strategy and Corporate Strength

With approximately $12-13 million in treasury, Montage is well-funded through feasibility study completion and maintains significant institutional backing. Notable shareholders include Lucas Lundin and Ross Beaty, with additional support through Sandstorm Gold. The company is evaluating various financing options for the $490 million capex requirement, including local debt providers, strategic partners, and streaming arrangements.

Growth Strategy

The company is actively exploring satellite deposits within trucking distance of Kone, targeting higher-grade feed to enhance project economics.

Stewart explains: "A relatively small deposit at a higher grade can significantly impact the economics of a large low-cost operation. Things that you might not look twice at if you're looking for a standalone deposit actually become very meaningful."

Hugh Stewart, CEO of Montage Gold

The Investment Thesis for Montage Gold

• Asset Quality
  • Large-scale resource of 4.3M oz indicated
  • Robust economics with 30%+ IRR
  • Technically straightforward with low strip ratio
  • Located in favorable mining jurisdiction
• Value Proposition
  • Market cap of $65M represents significant discount to NPV
  • Well-funded with $12-13M cash
  • Strong institutional shareholders
  • Multiple potential catalysts ahead
• Near-term Catalysts
  • Feasibility study completion (Q4 2023)
  • Environmental permit (Q1 2024)
  • Mining permit (Q2 2024)
  • Ongoing exploration results
• Action Points for Investors
  • Consider entry at current depressed valuation
  • Monitor feasibility study results
  • Watch for exploration success from satellite targets
  • Track permitting progress

The gold mining sector faces increasing challenges in making major discoveries, particularly those with sufficient scale to interest major producers. West Africa remains one of the few regions globally where large-scale projects can still be found and developed at reasonable costs. However, the industry faces rising capital costs and increasingly stringent requirements for project development. In this context, Montage Gold's Koné project represents a compelling opportunity. The project's scale, with planned production exceeding 200,000 ounces annually, places it in a select group of development projects globally. The technical simplicity of the deposit, combined with its location in a favorable mining jurisdiction, enhances its strategic value.

"There is a dearth of scale projects in Africa these days, especially things that are going to deliver plus 200,000 ounces."

Montage Gold presents a compelling investment opportunity in the gold development sector, backed by strong technical fundamentals and significant scale. The current market valuation appears to discount both the project's robust economics and strategic value in a sector where large-scale discoveries are increasingly rare. While financing the $490 million capex requirement presents a challenge at current market valuations, the company's strong institutional backing and multiple financing options provide potential paths forward. The combination of near-term catalysts through feasibility study completion and permitting, alongside exploration upside from satellite deposits, offers multiple potential value drivers for investors. However, investors should consider the broader market context and financing risks inherent in developing large-scale projects in the current market environment.