Granite Creek, Ruby Hill, And Lone Tree Will Advance Gold Production

Key Takeaways

• The development and strategic investments in gold projects are expected to significantly boost i-80 Gold's future production and revenue.
  
• Improved processing capabilities and strategic project de-risking are anticipated to enhance operational margins and stabilize future earnings.
  
• Operational and financial challenges, including water issues, reporting changes, funding reliance, and increased costs, threaten i-80 Gold's production targets and revenue stability.

Catalysts

A mining company, explores for, develops, and produces gold, silver, and polymetallic deposits in the United States.

• The development of new underground and open pit gold projects, including Granite Creek, Ruby Hill, and Lone Tree, is expected to significantly increase i-80 Gold's future gold production, potentially enhancing future revenues from increased sales volumes.
  
• The planned refurbishment of the autoclave is expected to improve processing capabilities and efficiency, thereby enhancing operational margins and contributing positively to net margins upon completion.
  
• Advancements in dewatering systems at the Granite Creek Underground and the successful management of water ingress issues are expected to stabilize and increase production rates, positively impacting future earnings.
  
• Strategic investments in feasibility studies and engineering evaluations for various projects are expected to de-risk these projects, potentially attracting financing and improving future earnings stability and growth.
  
• Continued permitting activities across gold properties, along with a structured recapitulation plan, are anticipated to support long-term development opportunities, potentially driving future revenue and improving financial positions.

i-80 Gold Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming i-80 Gold's revenue will grow by 66.3% annually over the next 3 years.
• Analysts are not forecasting that i-80 Gold will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate i-80 Gold's profit margin will increase from -241.4% to the average CA Metals and Mining industry of 21.4% in 3 years.
• If i-80 Gold's profit margin were to converge on the industry average, you could expect earnings to reach $49.5 million (and earnings per share of $0.09) by about April 2028, up from $-121.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.6x on those 2028 earnings, up from -2.1x today. This future PE is greater than the current PE for the CA Metals and Mining industry at 13.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.52%, as per the Simply Wall St company report.

i-80 Gold Future Earnings Per Share Growth

Risks

• The company has encountered water ingress issues at Granite Creek, which have delayed progress and could impact mining rates and gold production, potentially affecting revenue and earnings.
  
• The transition from IFRS to U.S. GAAP has resulted in significant changes to financial reporting, including the expensing of certain predevelopment costs and reclassification of liabilities, which could negatively impact net margins and reported earnings.
  
• Management's recapitalization plan is heavily reliant on obtaining senior financing, but additional technical studies and potential lender concerns could delay funding, impacting liquidity and the ability to fund ongoing projects, consequently affecting future revenues.
  
• The inclusion of the autoclave refurbishment changes the timeline for recapitalization efforts and increases capital expenditure requirements, which may strain financial resources and impact net margins.
  
• Lower-than-expected production in 2024 due to operational challenges, such as higher water ingress rates and unbudgeted low-grade mining, resulted in lower revenues and contributed to the net loss position, raising concerns about meeting future production targets and revenue forecasts.

Valuation

• The analysts have a consensus price target of CA$2.325 for i-80 Gold based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$4.0, and the most bearish reporting a price target of just CA$1.09.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $231.5 million, earnings will come to $49.5 million, and it would be trading on a PE ratio of 22.6x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of CA$0.83, the analyst price target of CA$2.32 is 64.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.