I have been tempted to buy a position in WGX for a number of years now (looking at it yet again). I like the theory of buying marginal producers in a rising gold price environment and they don't come more marginal than these guys. Despite record gold prices they are still generating little if any free cash flow. Just an observation regarding their production profile:
In this same time frame A$270m (about A$270/oz) has been spent in "Growth" Cap Ex. Assuming WGX achieve the lower end of their guidance for FY21, their production would effectively be the same as what it was in 2016/17. Question: Where is the growth? How much of this Growth Cap Ex is actually sustaining? I suspect their true AISC is much closer to A$2,000/oz (which can still work in this environment provided the hedging doesn't get in the way).
Like some on this thread, I am wondering if this is the year everything starts to fall into place and Big Bell delivers some of this promised growth. If so, there may certainly be some value in this one. I also like the fact that they are going to run down their hedge book and potentially deliver more oz into the spot price in the future (this should see some cash flow). Big Bell also looks to have exploration potential as well.
I would be interested in people's thoughts on this.
WGX Price at posting:
$2.17 Sentiment: None Disclosure: Not Held
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