Metals and Mining Stocks Under Discussion – WAF, AMI, WGX

On 6 December 2019, S&P/ASX 300 Metals & Mining index at the time of writing was trading at $4307.90.

Recently, the index made its 52-week high level of $4798.70 on 24 July 2019, and since then it has declined by ~10%.

However, with the cooling-off of trade tensions between US and China, revival in commodities segment especially because of increase in demand from the Asian market can be expected in the coming times, benefitting entire metal and mining industry. Three important Australian metals and mining companies with recent updates are West African Resources Limited (ASX:WAF), Aurelia Metals Limited (ASX:AMI) and Westgold Resources Limited (ASX:WGX).

Comparative Chart (Source: Thomson Reuters)

West African Resources Limited (ASX:WAF)

West African Resources Limited is involved in the development of the Sanbrado Gold project; mineral exploration in Burkina Faso.

September’19 Quarter Key Highlights:

Under project development,

• First gold pour on track for mid-2020 and is well within budget.
• Ausdrill appointed as preferred tenderer for open-pit mining at Sanbrado.
• Structural steel installation has commenced for the process plant.
• More than 1.4 gigalitres of water pumped from the Nakambe river to the water storage facility.

The surface grade control drilling program was completed on M1 South - 118 holes for 10,482m RC and M5 South - 202 holes for 9,615m RC.

Modelling of the surface grade control data for both pits has been completed in preparation for open pit ore mining. The new drilling reconciles well with the corresponding areas of the April 2019 open pit ore reserves, with no material changes to the early production schedule anticipated.

The corporate highlights from WAF’s quarterly activities include the following:

• Managing Director Richard Hyde transitioned to Executive Chairman and CEO,
• COO Lyndon Hopkins appointed as Executive Director, joining the WAF Board,
• Mining industry executives Rod Leonard and Nigel Spicer appointed Independent Non-Executive Directors,

In addition to the above development, Management appointments included

• Luke Holden as General Manager – Operations,
• Stuart Cruickshanks as General Manager – Technical Services and
• Todd Giltay as General Manager – Finance.

WAF marked a significant achievement after getting added into the S&P/ASX 300 index.

Under operating costs,

project expenditure in the quarter was reported at $61.1 million, and administration costs stood at $0.15 million.

The company’s cash on hand at the end of the quarter was reported at $60.7 million. It had drawn USD 110 million under US$200 million Taurus finance facility.

WAF’s looks forward to the following pointers during the December 2019 Quarter:

• Underground grade control diamond drilling at M1 south is scheduled to commence in preparation for ore development.
• Structural and mechanical installation of the mill and process plant is planned to be largely completed.
• Instrumentation and electrical installation are planned to commence. An Open-pit contractor is scheduled to mobilise equipment and begin mining operations.

On the stock information front,

On 06 December 2019, WAF settled the day’s trade at $0.415 up by 1.22%, with the market cap of ~$356.9 million. Its last EPS was noted at negative of $0.023.

Its 52 weeks high and 52 weeks low stand at $0.565 and $0.212, respectively, and has generated a return of 64.00% for the last one year, -12.77% for the last three months, and -15.46% for the last one month.

Aurelia Metals Limited (ASX:AMI)

Aurelia Metals Limited is involved in the production and exploration of key minerals such as gold, copper, lead and zinc.

On 04 December 2019, the company informed the market about its strategy to gain access to reliable water sources to support operational activities at the Peak Mines near Cobar in New South Wales (NSW).

Peak mine received conditional approval from the Cobar Shire Council in the month of October 2019 to build and operate a water pipeline to source groundwater to Peak’s existing operations from the historic Great Cobar Copper Mine, subject to work approval under the Water Management Act 2000. Moreover, the application for the final two outstanding administrative approvals is expected to receive grant within the coming weeks.

Previously, water used to be obtained from the Cobar Council via high-security water from the Cudgegong and Macquarie regulated rivers. With enhanced water efficiency measures and dewatering of the New Cobar Mine, Peak has already reduced its reliance on water sourced from the council by 50%.

In the previous update, the company’s Executive Chairman & Acting CEO, Cobb Johnstone stated that the results from Federation and Kairos are standouts and are being followed up as a priority. They are also encouraged by early indications of mineralisation from Athena which they look forward to progressing. They continue to be very excited by the unrealised exploration potential of their assets and remain strongly committed to unlocking value through organic growth.

In preparation for development and mining access expected in the June quarter next year, the Company has committed significant additional resources to infill and exploration drilling in the high-grade Kairos lode. Results have shown the upper area to be variably mineralised, with hole UD19PP1563 in particular returning the following exceptionally high grade intercept i.e. (UD19PP1563) 6 meters at 196.0g/t Au, 0.2% Pb+Zn & 13g/t Ag from 139 meters, including 1 meter at 1160 g/t Au, 0.1% Pb+Zn & 75 g/t Ag from 139 meters.

On the stock information front,

On 06 December 2019, AMI settled the day’s trade at $0.410 down 1.205 %, with the market cap of ~$362.47 million.

Its current PE multiple is at 9.880x, and its last EPS was noted at $0.042.

Its 52 weeks high and 52 weeks low stand at $0.990 and $0.390, respectively, and has generated an absolute return of -41.13% for the last one year, -30.83% for the last six months, and -20.95% for the last three months.

Westgold Resources Limited (ASX:WGX)

Gold explorer and developer Westgold Resources Limited operates primarily in Western Australia.

Recently, the company informed the market about completion of demerger of Castile Resources Ltd. On 25 November 2019, the company concluded its AGM where shareholders overwhelmingly approved the demerger of Castile (99.9% in favour).

The ASX release states that in-specie distribution of Castile shares to Westgold shareholders was completed on a one (1) for four (4) basis.

Both Westgold and Castile pleased to advise that Castile has today lodged a prospectus with ASIC for a non-renounceable pro-rata entitlement offer.

Pursuant to the Prospectus, every shareholder of Castile has the right, but not the obligation, to an additional Castile share for each share it was allotted in the demerger at a price of $0.20 per share.

Mark Hepburn, Castile’s new Managing Director, stated that they are delighted to commence as the inaugural Managing Director of Castile and genuinely excited to see its rich polymetallic prospects in the Tennant Creek region of the Northern Territory receive the funding they deserve to unlock their full potential. With the benefit of existing infrastructure in Tennant Creek and over ten years of geological exploration and assessment on these tenements already completed, they will be off to a flying start.

In another update, Paradice Investment Management Pty Ltd ceased to be a substantial holder in the company, effective from 27 November 2019.

September’19 Quarter Key Highlights:

Group gold output for the quarter was reported at 57,472 ounces at a Cash cost (C1) of $1,173/oz and an AISC of $1,410/oz. Gold output was outside of physical guidance by 9% but exceeded fiscal (range midpoint) by 7% for cash costs (C1) and 2% for AISC. During the quarter, exploration results included 75.0 m at 8.15g/t from 49m in hole WGU230 at the Starlight Mine (FGO); 11.0 m at 7.77g/t from 263m in hole CNDD044 from Consol’s Lode, at the Paddy Flat Mine (MGO); 25.04 m at 6.32g/t from 50m in SEDD007 at the South Emu Mine (MGO); and 13.5 m at 9.82g/t from 64m in BBDD016 at the Big Bell Mine (CGO).

Mine operating cash flow from group gold operation was reported at $25.3 Mn. Under gold hedging, the company maintained a hedge position as on 30 June 2019, at 202,500 ounces at an average of $1,879/oz (essentially 10,000 ounces per month until June 2021).

On the stock information front

On 06 December 2019, WGX settled the day’s trade at $2.020 up 0.498 %, with the market cap of ~$ 802.93 million. Its 52 weeks high and 52 weeks low stand at $2.570 and $0.800, respectively.

The stock has generated a return of 125.84% for the last one year, 19.64% for the last six months, and -18.29% for the last three months.

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