Today’s article features ONE gold producer, our top gold stock pick, that we think is most likely to outperform its industry peers out of our Gold Investing Pro universe of gold stocks. If you haven’t been following this series of articles, we encourage you to read Parts 1, 2, and 3.
The comments above & below are edited ([ ]) and abridged (…) excerpts from the original article by SmallCapPower.com
We began this process of finding the one stock that we like the best by distilling our list of 34 companies down to just 5. The criteria that we looked at in detail were: companies operating in a safe, mining-friendly jurisdiction, with low debt levels and an attractive valuation relative to peers. After filtering the results, the following 5 stocks stood out to us: Argonaut Gold Inc. (TSX: AR), Timmins Gold Corp. (TSX: TMM), Yamana Gold Inc. (TSX: YRI), McEwen Mining Inc. (TSX: MUX), and Wesdome Gold Mines Ltd. (TSX: WDO).
However, as mentioned in Part 2, no single multiple or valuation technique will isolate the best stock in which to invest. Thus, we looked at several other factors when making our top choice. Specifically, we looked at:
- Company’s management team and experience relative to their mining operations and jurisdictions.
- Next, we reviewed the main assets of the company, to see if they are located in a key geological area, with known adjacent mining operations
- Lastly, we looked at the company’s (or management’s) ability to raise capital
Having isolated these factors, one winner emerged that not only fit our risk tolerance but also had near and mid-term catalysts that would fuel growth and shareholder returns. That pick is Wesdome Gold Mines Ltd. (TSX: WDO)…
Wesdome has three 100% owned Canadian properties including the Eagle River Complex and Moss Lake Property in Ontario, plus the Kiena Complex in Quebec. The Eagle River Complex consists of two high-grade operating gold mines (Eagle River underground and Mishi open-pit), and has been producing 50 Koz Au consistently since 2002…
Wesdome Gold Mines has had no trouble raising capital. Whether it be a private placement or public offering, Wesdome has strong investor interest…YTD, Wesdome’s stock price has nearly doubled thanks to such interest…
Looking forward in 2017 and beyond, Wesdome:
- has positive near and mid-term catalysts with the potential to grow into a mid-tier gold producer.
- has high-grade producing assets…with growing reserves…[and,] considering past performance and current exploration results, Kiena can produce approximately 120,000 ozt of gold per year, bringing the consolidated production outlook of Wesdome beyond 200,000 ozt starting in 2021.
- has a 2017 exploration plan of $13.1mm which is the highest in over 10 years, and is sure to generate positive news flow for the Company in 2H/2017…
- has a strong balance sheet with a cash balance of $26.8mm, working capital of $15.6mm, and total debt of $13.2mm. It can be expected that sustaining and exploration activities will be funded by cash and operating cash flows.
- has 2017 guidance of 52-58K ozt Au at AISC of US$1,075-US$1,150/ozt which is conservative considering production is expected to come from three high-grade zones and Wesdome has the option to increase throughput to 2,500 tpd from base case of 2,000 tpd at the Eagle River Complex.
With the stock price nearly doubling in the past year, it appears that most of Wesdome’s short-term catalysts appear to be priced in. However, looking further ahead to 2021 and beyond, production from Kiena and the potential to become a mid-tier producer provides an excellent rationale for long-term investing in Wesdome Gold Mines Ltd.
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