Westgold is kind of the Australian version of Resolute Mining in some sense that they have spent much of the last three years on major capital expenditure projects that have delivered below their guidance. I have been hopeful but cautious about their progress and only mid last year did I start profiting from Westgold stocks that I began to buy in late 2016.
The Big Bell mine is looking encouraging but I am not going to open my champagne until I can see something really moving in the coming two quarters. My experience with major capital development projects is that the proof in the pudding is in the eating, not the taking out of the oven. This is in the figures being delivered showing a steady trend. Fortnum is a clear example where it took quite a while for the mine to gain momentum to cruise.
Noe the company ended the quarter with $137m cash, Bullion and investments. This includes $45m raised during the quarter. To my knowledge, the company increased the cash balance by less than $10m during the quarter. It is a fair result, though I would want to see the next quarter for a better understanding of how they are travelling.
I think the company's guidance track record has been unreliable so I reserve my excitement. Had been very hopeful at start of the financial year, but saw those hopes not being fulfilled during the quarters. The stock price gives an implied EV/AISC-Adjusted production of around $6 600/oz, similar to RSG. Comparable peers like SLR RMS PRU are trading at $9 200/oz while the larger or substantially low cost miners like SAR EVN and GOR are trading now at $13 000. I guess the market is on par with my views.
That being said of my sometimes scathing evaluation of the company, I am actually looking to top up in early to mid September when I think the seasonal decline in gold and gold mining stocks occur. This coming year could see WGX shareholders experience the joy that RMS SLR shareholders experienced the last 18 months.
All the best, Brian
WGX Price at posting:
$2.46 Sentiment: Hold Disclosure: Held
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