MoneyTalks: Is this the best value gold company in Australia right now?

Experts

7 hours ago|Nick Sundich

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MoneyTalks is *’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now and in this edition we’re looking at one expert’s view on best value gold company in Australia.

Today we hear from Simon Catt, a director from Arlington Group Asset Management and an Australian expat who has lived in London for two decades.

“We like to back great companies with great assets and management; take a long-term view,” he said.

“We’ll quite often take a contrary view because we think it is important at what price you buy into the asset or the company and we look globally.”

Wiluna Mining (ASX:WMX)

Catt says this company is the “best value gold company in Australia”.

He has been following the Wiluna gold project for nearly his entire career but wasn’t a big fan of it until a couple of years ago.

“In 2019, we had the right guy come onboard the company at the right gold price,” he said.

“The guy’s name is Milan Jerkovic. He’s the executive chairman, he’s got a really capable Chief Operating Officer – a guy called Neil Meadows – and we always liked the asset, but waited for right guy with the right pla.

“Wiluna’s got a lot of gold, 7 million ounce resource, plus a 600,000 ounces reserve at 4.7 grams [per tonne] and what the current management team, which have been in place for three years, have started to focus on is underground sulphide ounces.

“If you look back at 100 years of Wiluna’s history there has been 4 million ounces mined against the current 7 million ounce resource, 600,000 ounce reserve and the average grade of those historical sulphide ounces mined, which make up 3 of the 4 million historically mined, is 7g/t.”

With the average grade of Australian underground gold mines at 4-5g/t, Catt says Wiluna is in the right ballpark with a 4.7g/t resource currently but thinks the reserve will grow in both size and grade based on average mine grade of 7g/t and as the company uses new exploration techniques and deploys a $30 million annual exploration budget.

“It’s quite a a shallow mine, most of those ounces are 200-300m down to 600m deep whereas the average depths of Australia’s successful large underground gold mines – names likeSt Barbara’s (ASX:SBM)Gwalia Mine,Northern Star’s (ASX:NST)Jundee Mine,Kirkland Lake (ASX:KLA)Fosterville Mine – these have been going deeper using new exploration techniques,” he said.

“So we think that’s what’ll happen to Wiluna, as they use modern techniques like Hi-Seis using some of the same tools as these mines to look deeper. As the drillbit turns we think they’ll find more and higher grade ounces.

“We invested in [a recent] equity raise, $114m at current prices of $1 per share, plus the company has $54m in debt from a London trading house calledMercuriaand is currently producing 50,000 ounces of gold increasing to over 100,000 ounces by this time next year.

“So we think Wiluna is the best value and that’s quite a controversial call considering recent history view of the asset – and that’s the opportunity – we think it’s the best value gold company in Australia.”

Wiluna (ASX:WMX) share price chart