By Valentina Ruiz Leotaud
While Africa-focused Galane Gold (TSX-GG) announced with much fanfare that it bounced back to profitability in the second quarter of 2016, thanks to an increase in production at its Mupane mine in Botswana, some analysts warn that the news really means “trouble in paradise.”
In a detailed report published late August on Hallgarten & Company’s website, analyst Christopher Ecclestone calls Galane’s profit for the June quarter “tiny.” He goes on to add: “The profit of a mere $99,000 on revenues of $9.34mn in a fairly strong gold price scenario represents a net margin of around 1%. Nothing to write home about.”
Galane Gold, an unhedged gold producer and explorer, recently acquired Galaxy Gold in South Africa. The firm's board, which approved the re-opening of the mine in July, has vowed to spend an initial US$2 million to get it up and running so that it can restart production by the end of the year.
Despite the positive news, Hallgarten’s analyst says Galane’s shareholders have reasons to be concerned. He lays out the company’s liabilities to back his claims: