Galiano Gold - An Attractive Turnaround Story with Exploration Upside

• Galiano Gold, under CEO Greg McCunn, has refocused from solely producing ounces to driving cash, resulting in a significant change in company strategy.
• The company operates the Asanko project in Ghana, a joint venture with Gold Fields, which produces approximately 240,000 to 250,000 oz of Gold per annum.
• Galiano Gold's market cap is about USD $375 million, a 50% increase from June, and they have recently signed off on an additional USD $10 million for exploration, aiming to deliver more economic ounces.
• The company has secured a USD $300 million facility, positioning them to explore additional mergers and acquisitions and potentially diversify from their single-asset focus.
• Despite the pandemic, the company remains on track, maintaining production and cost guidance for 2020 and seeking further cost reduction strategies for 2021.

About Galiano Gold

Galiano Gold (NYSE/TSX: GAU) operates the Asanko Gold Mine in Ghana alongside joint venture partner Gold Fields. Under CEO Greg McCunn, Galiano has undergone an impressive turnaround over the past 18 months and now offers an attractive investment opportunity based on its low-cost production profile, strong balance sheet, and exploration upside.

Profitable Low-Cost Gold Production

The Asanko Gold Mine is forecast to produce 225,000-245,000 oz of gold in 2020 at all-in sustaining costs (AISC) of $1,000-1,100/oz. This production comes from multiple open pit mines that feed a 5.4M tonne per annum processing plant. In Q2 2020, the mine produced 69,000 oz at AISC of $1,067/oz. This brought year-to-date production to 135,300 oz at AISC of $930/oz, comfortably on track to meet full-year guidance.

The life of mine plan forecasts average annual production of 230,000-250,000 oz out to 2030, with AISC averaging just over $1,100/oz. However, management is targeting a reduction in AISC to around $1,000/oz through optimizing operations and finding additional low-cost ounces nearby. This profitable production profile means Galiano is generating strong cash flows to support growth initiatives and shareholder returns.

Fortified Balance Sheet Provides Financial Flexibility

Under McCunn’s leadership, Galiano has shifted focus from production growth to free cash flow generation. This has transformed the balance sheet from minimal cash 18 months ago to a current cash balance of $68 million and no debt. Galiano also has a $30 million revolving credit facility and a $300 million shelf prospectus providing additional financial capacity.

This strong financial position gives Galiano flexibility to invest in high-return projects at Asanko as well as pursue complementary M&A opportunities to become a multi-asset producer. The company is well-funded to create value from its core Ghanaian assets while opportunistically adding quality ounces in new jurisdictions when the right assets become available.

Exploration Upside at Asanko Gold Belt

In addition to cash generation, Galiano offers investors exploration upside at its 21,000 hectare land package along the highly prospective Asanko gold belt in Ghana. Recent drilling has successfully added reserves at the Abore and Akwasiso satellite pits, providing low-cost mill feed over the next 2 years. The exploration budget has also been expanded by $10 million to accelerate drilling at priority targets across the belt.

The main focus is now on the 3km-long Miradani trend located 10km from the mill. Early results have shown strong potential for Galiano to outline its next major gold deposit here. Drilling is also planned along 3 advanced targets west of the mill that were recently acquired. Success from this accelerated exploration program would provide a significant catalyst for the stock by highlighting the upside potential at Asanko beyond the current 10-year mine life.

Experienced Leadership to Execute Strategy

Since joining Galiano as CEO in 2019, Greg McCunn has overhauled the corporate culture to emphasize stakeholder returns rather than production growth. He brings over 25 years of mining experience, having previously held executive roles with Alio Gold and TMAC Resources after beginning his career with Homestake and Barrick Gold.

McCunn has assembled a talented management team including Paul Klipfel as SVP Exploration. Klipfel is leading the expanded exploration program and has extensive experience in West Africa. Effective leadership gives investors confidence that Galiano has the skill set to successfully operate Asanko, while also pursuing well-judged expansion opportunities in due course.

Investment Opinion

With Asanko now transformed into a lean, cash-generating operation under a refreshed leadership team, Galiano Gold appears primed to deliver strong shareholder returns. The company offers a unique mix of low-cost gold production, a healthy balance sheet, and significant exploration potential within a premier mining jurisdiction. Trading at under 0.7x NAV, Galiano remains attractively valued relative to peers.

For investors seeking junior producer exposure with reinvestment upside, Galiano deserves a close look. As exploration results start flowing and management executes expansion plans, Galiano's re-rating story may have room to run.