A Lens over two Metals and Mining Sector Stocks – WGX, WSA

  • Jan 23, 2020 AEDT
  • Team Kalkine
A Lens over two Metals and Mining Sector Stocks – WGX, WSA

The metals and mining sector consists of more than seven hundred entities engaged in the activities like exploration, production and development of minerals. It is one of the biggest sectors containing various diversified resource entities. One of the oldest sectors, since the middle of nineteenth century, it has been a substantial contributor to the economy of Australia. Moreover, the country is the biggest exporter of alumina, bauxite, coal and such resources.

Investment in gold stocks and nickel stocks

Gold investment has been a secure option for investors especially during the time of market instability. Valuable metals like gold and silver have been popular among investors for a long period of time. The investment in gold can be made either by buying stock in gold miners, ETFs, or by buying physical product. Investment in the gold stocks can also add diversification to an investor’s portfolio and are more attractive for growth investors compared to income investors. Besides, even a small increment in the gold price can result in a huge gain among the best gold stocks.

On the nickel front, it has been witnessed that it was the best performing base metal of last year, with the rising interest in nickel investment. Also, it was predicted that the demand for raw materials for EV would surge up, subsequently increasing the demand for nickel in the market. Moreover, it is one of the widely used metals on the planet, since it has variety of usage from the batteries to stainless-steel. As per market analysts, while looking at the nickel market, it is expected that with the continued demand for the nickel, it is expected to double up in the next two decades to reach approximately 4.074 million tonnes by the year 2040.

Let us now have a look at the two companies from Metals and Mining space – Westgold Resources Limited and Western Areas Limited.

Westgold Resources Limited (ASX:WGX)

Westgold Resources Limited, headquartered in St Georges, Perth, WA is an ASX listed, one of the leading Australian gold producers. The company has three production facilities in western Australia i.e. Fortnum gold project, Murchison Gold operations and lately commenced Cue Gold Operations.

December Quarterly Activities Report

On 22 January 2020, the company announced the quarterly activities report for the period ending December 2019, a few highlights of the report are as follows;

  • The company’s gold output has been increased by 9 per cent on quarter to quarter basis to be noted at 62,655oz.
  • Group cash costs have been reduced by 3 per cent (QoQ basis) to stand at $1,143oz, and All in Sustaining costs (AISC) have been reduced by 3 per cent (QoQ basis) as well.
  • The Westgold gold sales has been boosted up by 16 per cent to stand at 62,031oz, QoQ basis.
  • The mine operation cash flow has been surged by 55 per cent to $40 million on QoQ basis.
  • WGX net mine cash flow has moved (QoQ basis) from outflow standing at $1 million to inflow standing at $7 million.
  • The company has completed the demerger of Castile and its exciting NT polymetallic assets further focussing the group on its core Murchison gold operations.
  • The company has paid $6 million equivalent (3,750 oz) in gold pre-payment debt, which will be repaid in the time frame of six months.
  • WGX has $89 million of liquid assets, of which $37 million is in listed public company shares.
  • At the end of the quarter, the gold hedge position was 180,000 ounces at an average of $1,892/oz.

Westgold obtained screen fire assays for the high-grade intercepts

On 21 January 2020 the company announced that it has obtained screen fire assays for the high-grade intercepts at Great Fingall, which has considerably upgraded the intercept grades. The first announcement on it was previously made on 17 January 2020.

The + one kilometre down-plunge step-out hole from the lowest production levels at

Great Fingall has successfully intercepted the Great Fingall Reef with the following excellent outcomes:

  • 57m at 10.10 g/t (previously 7.95g/t) from 1,642.18m - Great Fingall Reef
  • 1m at 34.05 g/t (previously 20.17g/t) from 1,439.7m - Great Fingall Hangingwall Lodes
  • 35m at 3.27g/t from 1,493.22m - Great Fingall Hangingwall Lodes

WGX believes that this drilling has been highly significant in that it proved that the stratigraphic controls to mineralisation remained in place. The high grades typical of historic production have been restored at more than twice the depth of historical mining. Besides, the Great Fingall in Western Australia was one of the biggest and richest mines at the turn of the nineteen century.

New Base Metal Revealed

The company has further discovered new base metals in Hanging Wall. This mineralisation demonstrated a huge sulphide intercept, and was not only auriferous, but strongly bestowed with copper and zinc, making way for an thrilling new base metals exploration goal with an outcome of 6.3m at 3.71% Cu, 3.73% Zn and 0.73g/t Au from 479.76m.

Future Plans

The company plans additional drilling to define the up-plunge regions between historic mining and these intercepts across the ensuing year. The current open pit mining phase is expected to complete around April 2020, and underground mining is expected to exploit the gold ore systems. Further work is also planned by the company to better understand the base metal potential in that area.

Stock Performance

The stock of WGX last traded at $2.360 on ASX on 23 January 2020, rising by 1.724 per cent from its previous close. The company has approximately 399.67 million outstanding shares and a market cap of $927.23 million. WGX’s 52 weeks low and high value is at $0.915 and $2.570 respectively. The stock has generated a positive return of 9.43 per cent in the last six months.

Western Areas Limited (ASX: WSA)

Australia based Western Areas Limited contains the country’s highest-grade nickel mines. Western Areas fully own Foresstania, which is also its main asset. The company is Australia’s second biggest independent sulphide nickel miner as well.

WSA contracts with BHP Billiton Nickel West Pty Ltd and Jinchuan Co. Ltd

On 21 January 2020, the company has announced the award of new offtake contracts with BHP Billiton Nickel West Pty Ltd and Jinchuan Co. Ltd for the WSA’s high grade Forrestania Nickel Operation concentrate product. A few highlights of the agreement with Nickel West and Jinchuan are as follows:

Nickel West Contract

Time Period - A three-year contract starting from 1 February 2020 or until completion of the aggregate quantity.

  • Quantity – With a 30,000-tonne aggregate limit, 10,000 tonnes of nickel contained in concentrate per annum.
  • Delivery - Bulk logistics to Kambalda, consistent arrangements already in process.
  • Payable Rates - Payable rates are subject to customary confidentiality clauses and other terms are in line with industry standard.

Jinchuan Contract

  • Time Period – A two-year contract starting from 1 February 2020 or until completion of the aggregate quantity.
  • Quantity – 10k tonnes of nickel included in concentrate/year with a 20k tonne, aggregate limit.
  • Extension – The agreement can be extended by the mutual agreement for a further twelve-month period at an aggregate nickel quantity to be agreed between the Western Areas and Jinchuan.
  • Payable Rates - Payable rates are subject to customary confidentiality clauses and other terms are in line with industry standard.

Tsingshan

After execution of new agreements, the Company’s existing agreement with Tsingshan Group will end on 31 January this year. The company has a strong commercial relationship between Tsingshan since several years.

Stock Performance

The stock of WSA last traded at $2.810 on ASX on 23 January 2020, falling by 1.748 per cent from its previous close. The company has approximately. 273.68 million outstanding shares and a market cap of $782.73 million. WSA’s, 52 weeks low and high value is at $1.910 and $3.475 respectively. The stock has generated a positive return of 20.17 per cent in the last six months.


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