The first thing that jumped out at me when I looked at the Soma Gold (SOMA.V) investor deck was a thing I don’t see very often in the pile of decks that festoon my office.
WORK.
Like, the image on the front cover was of a big mining vehicle banging away on the vein.
Here it is.
For those who don’t consider themselves ‘drill spotters’, that is a big ol’ Sandvik DD2710 compact, single-boom electro-hydraulic jumbo drill.
Now I just wandered around the Vancouver Resource Investor Conference for two days and looked at 300 booths of mining explorers, and you better believe I saw a lot of maps, and pictures of big sky vistas, and some rocks, and guys in hard hats. Lots of stock imagery. Lots of PNGs the geo sent back from her iPhone.
I’ll tell you what I rarely see, and that’s:
- A big drill banging into underground rock.
- Large scale underground workings.
- Proof the money they’ve raised is going literally into the ground.
- De-risked projects with ounces headed out the door.
LET ME TELL YOU A STORY WITH A MAP
This is Colombia, with four big fat gold projects marked.
Between those four projects you’re looking at 46m gtold ounces, according to resource estimates. Could be more.
But that’s good for, at todays gold price of $2,854.90/ounce, around $131,325,400,000 USD
If that’s too many digits for you to track, book it as $131 billion.
Now if you had your druthers, it’d be nice to have a property with similar characteristics, even if the resource wasn’t as filthy as those monsters.
So here’s some more players.
Aris and Anglo/B2 have their hands no a nice little patch between two monsters and are doing great as a result.
That 5.5 million oz resource that Aris is cracking into right now, that’s a $15 billi0n resource by itself. Not bad for sixth place!
But what do you think it might be worth if another company had a plot right above Aris, maybe a stone’s throw from their fence?
ENTER SOMA GOLD
Well aint that a peach?
Soma’s properties are right in a prolific region, alongside major discoveries, ad oin trend with the Aris ‘Segovia’ project and Anglo and B2’s Gramalote project.
How close?
Like, literally at the fence line.
The yellow plot is Soma.
The black plot at the bottom of it is Aris, which is worth $1 billion today.
Aris has, admittedly, advanced theirproject further than Soma has. And Aris has a headstart on production.
But that’s not to say Soma isn’t producing.
In fact:
That’s four projects, all moving, with two mills – one running currently and the other soon.
If you’re a techie and want the specifics of each, brother I know my audience so I’m not going to make their eyes cross here, but you can go nuts on the company investor deck.
But those mills aren’t pretendsy.
El Bagre’s tale of the tape:
- The complex has a 450 TPD (tons per day) capacity.
- It includes processes such as crushing, grinding, gravity, flotation, cyanide leach, Merrill Crowe, and smelting to doré.
- It is fully permitted to expand to 1,000 TPD.
- The complex is powered by renewable hydropower generated on-site.
- Backup generators were installed in Q4 2024.
- It is located 3 km from the town of El Bagre, a mining town with access to an experienced mining labor pool.
- Ore-sorting technology is being tested with bulk samples.
But that’s not alone. Behold ‘the lemon’:
A second mill. fully permitted to 400 tonnes per day, being rehabbed now in the expectation of an impending restart.
BUT HOW MUCH ARE THEY PRODUCING?
2023 saw 30,000 ounces of gold produced at Soma, and while 2024 was down, that was due to their finding a split in the vein and having to work through some unproductive dirt, as well as ongoing power outages (hey man, it’s rural Colombia), which have since been mitigated with backup generators.
2025 adds artisinal workings to the mix as the Soma team have been integrating the locals, who appreciate having someone to sell to at an agreed upon rate.
2025 also adds milling to the numbers, with more mines expected to come online in future years.
Soma also has unexplored ground to start working, and the potential to – soonish – expand their resource estimate which, currently, isn’t advanced enough to make the big boys takes notice.
THE PLAN:
- Phase i is to increase the resource to more than 1m oz combined, which will make more people take note.
- Phasae ii is to restart the El Limon mill and use some doughbucks to expand capacity to 1400 TPD, and get recovery to above 90%, where the company hits better profitability.
- Phase iii is to double gold production to 65k oz by 2028, generating $50m of net profit, even assuming cheaper $2500 p/oz gold prices.
WHY NOW?
Three reasons:
- Value. The company, right now, is trading at 1.5x forecast 2024 EBITDA to market cap, good for a $50m valuation, or 5% of their neighbour’s value at Aris.
- Profitability. The company doesn’t get its plaudits currently because of a small quarterly loss (-$121k last qtr), but some of that is down to foreign currency adjustments from almost a year back, which points to strong profit potential going forward
- The stock chart. This chart shows the company has a lot of interest, despite perceived negativity, and has seen buying consistently even as competitors have struggled and its own numbers have picked up.
GOOD volume. GOOD volatility. GOOD price action.
At any point now, Soma can show a marginal improvement in production tonnage, grade, and the addition of milling and artisinal streams, and further drilling, which will put things over the top on profitability and resource estimate size.
It’s not an arbitrage, but it’s tasty. It’s not a ‘by this tme next week’, but it’s a ‘soon.’ At any point, news could turn the jets on and, considering the company is generating cash currently, every tweak, every additional revenue stream, every advance on the ground with what is already a series of assets worth well more than the market cap, brings the potential to spark this fire up.
Why am I telling you this?
Because I heard the pitch, I like what they’re doing, there’s a heavy ESG component that reduces jurisdiction risk, and makes the company popular on the ground, and – finally – I get the feeling gold is going to go on a run as the world gets increasingly weird.
And it’s getting weird out there.
I look at a lot of gold explorers, and their message is always “we think we’ll get to production in foiur or five years,” which makes me wince.
Soma is producing now. Their risk isn’t “maybe they wont get there” or “maybe they wont find anything”, it’s “maybe they won’t get to the size of their multi-billion dollar neighbours this year, while they produce and mill more and more gold on the properties that are already paid for.”
As far as risk goes, I like that.
— Chris Parry
FULL DISCLOSURE: No commercial interest in the company, no arrangement with them, but I am planning to take a position on dips. So, by all means, sell some.