Ralph Aldis, portfolio manager at US Global and contributor to Frank Talk, selected Wesdome Gold Mines (Toronto: WDO) as his top speculative idea for 2019. The stock has since risen 27%. Here's his latest update on the Canadian junior gold miner.
We’re halfway through 2019, and I still believe that Toronto-based Wesdome Gold Mines is a prime takeover target for mid-tier producers looking to expand production in a mining-friendly jurisdiction.
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Any such deal, I believe, would come with an attractive premium and reward shareholders for future production growth and exploration potential.
Thanks to competent management and its disciplined approach to raising money, the company maintains a strong balance sheet.
It ended the first quarter with a strong cash position of $27.8 million, with mine operating profit up 30 percent from the previous quarter to $16.3 million. It’s well financed, having recently secured a credit line of $40 million. This likely eliminates the need for additional equity financing.
But for many investors, Wesdome is all about high grade and its portfolio of attractive properties with the potential for strong production growth. Its remarkable Eagle River Mine generates superb near-term free cash flow capacity, funding the company’s major exploration and development programs.
In the first quarter, the company reported that head grade improved 75 percent to 18.5 grams per tonne (g/t), well above guidance of 15.5 g/t. It’s estimated that Wesdome’s development project, the Kiena Complex in Val D’Or, Quebec, could help propel it into a 200,000-ounce-per-year gold producer.
For the six-month period through June 28, Wesdome was up nearly 22 percent. For the 12-month period, it was an incredible 82 percent. Again, Wesdome looks to be a M&A target, so investors probably could do well to buy and hold onto Wesdome for a while.
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