Original-Research: Desert Gold Ventures Inc. (von GBC AG): BUY

Original-Research: Desert Gold Ventures Inc. – from GBC AG

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19.09.2024 / 06:00 CET/CEST

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Classification of GBC AG to Desert Gold Ventures Inc.

Company Name: Desert Gold Ventures Inc.

ISIN: CA25039N4084

Reason for the research: Management interview

Recommendation: BUY

Target price: 0.311 USD

Target price on sight of: 31.12.2025

Last rating change:

Analyst: Matthias Greiffenberger, Marcel Schaffer

‘This is a huge opportunity for mining investors paying attention to Mali as

valuations are only just starting to reflect the more positive reality on

the ground.’

In this interview, GBC AG speaks with Jared Scharf, CEO of Desert Gold

Ventures, a prominent gold exploration company with a focus on West Africa,

particularly Mali. Recent developments in Mali’s mining sector, including

key government approvals for major players like Allied Gold and B2Gold, have

led to a optimistic market outlook for the region. Scharf provides insight

into Desert Gold Ventures’ strategic position in this evolving regulatory

landscape and how the company is well-positioned to capitalize on this

momentum. He discusses potential synergies with neighboring mining giants

such as Barrick Gold, the impact of rising gold prices on their strategy,

and the company’s long-term exploration and development goals. Additionally,

our recently published research report assigns a target price of USD 0.311

(CAD 0.425; EUR 0.29) with a buy rating, highlighting the significant upside

potential compared to the current share price (

https://www.more-ir.de/d/30341.pdf). Scharf also explains how Desert Gold

Ventures plans to leverage its strategic location and improving investor

sentiment to create lasting value for shareholders.

GBC AG: Mr. Scharf, with the recent announcements from Allied Gold and

B2Gold regarding their mining activities in Mali and the government’s

support, how do you view the current regulatory environment for mining

operations in the country?

Jared Scharf: These are material break throughs for both companies that

cannot be understated and the market is reacting accordingly with both

company’s stock moving materially higher. Moving forward this provides a

precedent, clear understanding and framework for mining companies and

investors that even with the recent challenges of the last few years, the

Malian government is supportive of the mining industry and its stake

holders. This is a huge opportunity for mining investors paying attention to

Mali as valuations are only just starting to reflect the more positive

reality on the ground. I think the market was overly pessimistic regarding

Mali. Companies like B2, Allied and ourselves have been oversold as a result

in my opinion. With the recent positive news coming out of Mali, I think a

lot of those concerns have been put to rest. I expect the situation will

continue to improve for investors who hold positions in Mali based mining

stocks.

GBC AG: The market has responded positively to these developments, as

reflected in the rising stock prices. How do you believe Desert Gold

Ventures is positioned to capitalize on this momentum in the Malian mining

sector?

Jared Scharf: Desert Gold has been building its land position in Mali and

developing its assets there since 2011. With so many geopolitical headwinds

along the way, it hasn’t been an easy ride for our shareholders. I suspect

however that this dynamic is changing as we speak and the worst is behind

us. As the mining sector in country normalizes, both our exploration and

mining initiatives will become more valuable. The gold price is also

helping.

GBC AG: Considering Barrick Gold’s proximity to Desert Gold Ventures and

their production hitting a 20-year low, do you see potential synergies or

opportunities for collaboration between your companies?

Jared Scharf: Barrick, like all mature mining companies, is constantly

looking for opportunities to grow their economic resource base and replace

their mining reserves. They typically do this by one of two ways; either

through brownfield exploration near their existing mines or via

acquisitions. Often times both. Desert Gold is strategically located in the

heart of West Mali’s mining camp with Allied Gold bordering us to the north,

Endeavour Mining bordering us to the south west and Barrick and B2 Gold

along trend to the South. Given the regional size of our land package at 440

km2 and its location, I believe Desert Gold is a viable acquisition

candidate for the bigger players in the region. Western Mali/Eastern Senegal

has a long history of significant M&A transactions.

GBC AG: What impact do you expect the recent mining permits granted by the

Malian government to have on Desert Gold Ventures’ exploration and

development timelines?

Jared Scharf: Generally speaking, I believe it shows a willingness on the

Malian Government’s part to collaborate and compromise with Western Mining

companies on a productive basis to achieve positive results for all

stakeholders. I suspected that this was the case all along but I believe the

capital markets had a much more pessimistic view in recent years. With the

recent regulatory permitting breakthroughs with Allied and B2, I believe

market sentiment will gradually improve for all companies operating in Mali.

Our SMSZ project is fully supported by the Mali government and I do not

expect any regulatory permitting issues. I note that in our 10 years

in-country we haven’t had any.

GBC AG: With increasing institutional focus on electrification and base

metals, many miners are pivoting towards copper and other resources. How

does Desert Gold Ventures balance the focus on gold while maintaining

relevance in this shifting landscape?

Jared Scharf: I’m somewhat skeptical regarding the narrative surrounding

base metals and electrification. I think the market is too. Look at the

lithium price for example. I do think the global economy is slowing down and

could possibly even dip into recession in 2025. I’m not sure industrial

metals will out-perform in that scenario. However monetary metals like gold

typically do perform well in that scenario. I think in that context gold is

a leading indicator for what is happening in the global economy. I don’t

think this time will be any different. The macro environment reminds a lot

of 2000/2001.

GBC AG: Allied Gold and B2Gold have both recently received approvals for key

mining phases. What lessons can Desert Gold Ventures take from their

experiences to potentially expedite your own approvals and development

phases?

Jared Scharf: In our case we already have a fully permitted mining license

where we plan to start our initial open pit. So no issues there. In terms of

lessons learned, I think the biggest one is perseverance. When macro forces

are working against you the best thing to do is focus on creating value even

if that value isn’t yet acknowledged by the market. Have a plan and stick to

it as best you can and focus on what you can control. In our case that has

been continuing with our exploration initiatives and develop the mine to

fast track into production.

GBC AG: How does the rise in gold price influence your overall strategy for

Desert Gold Ventures, particularly with regard to attracting investors and

achieving production in the short to medium term?

Jared Scharf: At the moment there is a huge disconnect between the value of

our gold ounces in the ground at roughly $10 market cap per ounce and the

spot price of gold at $2,500. My intention is to realize that value

disconnect for our shareholders by mining those ounces. I believe as the

bull market in precious metals matures, assets like ours will become more

valuable which will make it much easier to attract capital in both the

primary and secondary markets. From an economic perspective, a higher gold

price means better margins which will no doubt positively impact the results

of our mine study which will hopefully be finished before year end. The

improved political situation in Mali should also help.

GBC AG: Can you provide an update on Desert Gold Ventures’ exploration

results and how they may contribute to the broader gold production capacity

in Mali?

Jared Scharf: Even though the investment climate has been tough in Mali

recently, we were still able to do a small 3,500 meter drill program in

2023. Results are still pending for roughly half the program. Initial

results came out a month ago and were encouraging and supportive of our

mining plan. I look forward to releases the next set of results and mine

plan before year end.

GBC AG: With investor sentiment improving due to Mali’s proactive stance on

mining, how do you plan to leverage this optimism to secure further

investment or strategic partnerships for Desert Gold Ventures?

Jared Scharf: To be honest with you I’ve seen many jurisdictions fall in and

out of favor over the years. Mali has been out of favor for several years

now, but it wasn’t always that way and now this is changing again. The work

we do as a company does not change regardless of sentiment. The audience

just becomes more receptive to our value proposition. Investors are

opportunistic and I think they are seeing the opportunity in Mali because

stock prices have been hit hard. The upside is obvious in the context of the

gold market and improving situation in Mali.

GBC AG: Given Desert Gold’s strategic location alongside major industry

players like Barrick, Endeavour, B2Gold, and Allied, how does this

geographical positioning provide a competitive advantage for Desert Gold

Ventures? Do you see this proximity influencing your future development

plans or potential partnerships?

Jared Scharf: Yes, there are strategic advantages to our project location.

There is the potential to leverage existing mining infrastructure close to

us. Endeavour Mining and Allied Gold’s mining infrastructure is close enough

to several of our deposits to look into possible JVs like toll milling etc.

M&A is always more compelling for companies already operating in the

district of their target.

GBC AG: Finally, how do you see Desert Gold Ventures evolving in the next 5

to 10 years? What role do you envision your company playing in the Malian

gold sector, and how will you differentiate your strategy from other players

in the region?

Jared Scharf: At the moment we are sitting on 1.1 million oz resource at our

SMSZ project. There are 28 gold zones on the property and only 5 of them are

incorporated into the existing resource. We will be updating the resource as

part of the mine study and I’m hopeful we can incorporate additional

resources from a new zone called Gourbassi West North. But the point is

there are obvious ways to grow our current resource base. Ultimately what I

envision for our SMSZ project is an emerging mining district within the

Kenieba Window of Western Mali/Eastern Senegal. Our mine study envisions the

development of two initial open pits to start. With continued exploration

and development over time I believe we will bring on many more. Hopefully

once we start mining in this area we’ll continue to do so for the next 30

years unless of course our shareholders are offered something better!

GBC AG: Thank you for the interview.

GBC conclusion from the research report: Desert Gold Ventures Inc. presents

in our opinion an attractive investment opportunity due to its strategic

location in a rich gold region, a significant resource base, and ongoing

exploration efforts. The company’s SMSZ Project in Mali covers 440 km² along

a prolific gold zone and contains over one million ounces of gold. The

planned 30,000-meter drilling program in 2024 aims to expand resources and

identify new targets.

The Kenieba Window, part of the Birimian Greenstone Belt, is known for

high-quality gold resources averaging 2.22 g/t and substantial market

valuations. Recent acquisitions in this area have averaged 1.81 million

ounces of gold at $66 per ounce. Desert Gold Ventures’ SMSZ Project, with

1.08 million ounces of gold at 1.14 g/t and valued at $9 per ounce,

represents a notable opportunity. The project’s current market cap is about

$10 million, but it could be valued at $71.4 million based on recent

acquisition prices. After accounting for warrants and options, the equity

valuation is $69.5 million. Due to Desert Gold’s lower average grade

compared to peers, a 50% discount is applied, resulting in a valuation of

$35 million, or $0.155 per share. As the grade improves, the valuation is

expected to increase.

The company is also exploring the feasibility of a small heap leach mine,

which could potentially generate substantial cash flow. Preliminary

assessments suggest the mine could produce 15,000 to 20,000 ounces per year,

with a potential annual free cash flow of $20 million. With a 70% discount

applied to this project’s valuation, its contribution is $0.101 per share.

Incorporating this with the overall valuation, our target price is $0.311

per share. Given the significant upside potential, we rate the stock as a

BUY.

You can download the research here: http://www.more-ir.de/d/30815.pdf

Contact for questions:

GBC AG

Halderstraße 27

86150 Augsburg

0821 / 241133 0

(email protected)

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Completion Date (Time): 18.09.2024, 9:00am

First Distribution Date (Time): 19.09.2024, 6:00am

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