Galiano Gold's Promising Future Post-Asanko Mine Deal: Analyst Upgrades Stock

BMO Capital Markets analyst Raj Ray upgraded Galiano Gold Inc. GAU to Outperform from Market Perform, raising the price target to C$1.50 from C$1.20.

The announcement of the Asanko Gold Mine (AGM) consolidation by Galiano is a long-awaited transaction, simplifying the ownership structure and giving Galiano operational and strategic flexibility over the asset's future, the analyst writes.

The analyst also sees good potential for further optimization and future exploration growth at the AGM that could make the company attractive, especially given its heavily discounted valuation and stable balance sheet.

In addition, the transaction appears well-structured, which minimizes dilution for existing Galiano shareholders while maintaining balance sheet flexibility. 

Upon transaction close, the equity dilution is minimal at ~10%, while Galiano's attributable share of reserves and resources, production, and cash flows immediately doubles. 

The company's attributable share of total reserves (as of December 2022) will increase from 1.0Moz to 2.1Moz, and likewise, with resources, the company's share will increase from 2.3Moz to 4.6Moz. 

The production profile of the AGM is expected to increase gradually from ~165 koz in 2024 to ~240 koz in 2026 (100% basis), Ray added.

As of 2023-end, Galiano's pro forma cash balance is expected to be $128 million (no debt).

According to the analyst, Galiano remains in a comfortable position to fund the future capital obligations. 

Price Action: GAU shares are trading higher by 3.78% to $0.8593 on the last check Friday.