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Key Assumptions:

Project Overview:
- Cerro Caliche Project:
  - Production: 33K oz annually (average) for 9 years.
  - Initial Capex: $15M.
  - AISC: $1,400/oz.
- Expansion Potential:
  - Potential increase to 50K oz/year.
  - Total resource growth to 700K oz.
Gold Price:
- Current assumption: $4,000/oz.
Shares Outstanding:
- Fully diluted market cap: $10M at $0.10/share implies 100M shares.
Valuation Multiples:
- Using a 7x FCF multiple to calculate the market cap.

Step 1: Revenue and Free Cash Flow (FCF) Estimation

Revenue Calculation:

At $4,000/oz gold:

Revenue = Production × Gold Price:
- 33K oz × $4,000/oz = $132M annually.

Cost Calculation:

Total Costs = Production × AISC:
- 33K oz × $1,400/oz = $46.2M annually.

Free Cash Flow (FCF):

FCF = Revenue - Costs:
- $132M - $46.2M = $85.8M annually.

Step 2: Market Capitalization

Market Cap Calculation:

Market Cap = FCF × FCF Multiple:
- $85.8M × 7 = $600.6M.

Step 3: Stock Price Calculation

Stock Price:

Stock Price = Market Cap ÷ Shares Outstanding:
- $600.6M ÷ 100M shares = $6.01/share.

Step 4: Expansion Scenario

If production increases to 50K oz/year:

Revenue = 50K oz × $4,000/oz = $200M annually.
Costs = 50K oz × $1,400/oz = $70M annually.
FCF = $200M - $70M = $130M annually.
Market Cap = $130M × 7 = $910M.
Stock Price = $910M ÷ 100M shares = $9.10/share.

Conclusion:

At $4,000/oz gold, Sonoro Gold’s estimated stock price is $6.01/share based on current production guidance.
If production increases to 50K oz/year, the estimated stock price could rise to $9.10/share.

This analysis highlights the significant upside potential from resource expansion and higher gold prices, though risks remain with permitting, financing, and execution.

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Disclaimer

The user RockeTeller holds no position in TSXV:SGO. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Gold at $4,000/oz & production at 50K oz/year