WPG last traded at $0.08. The following is an extract from the report.
EMERGING GOLD PRODUCER: UP FOR THE CHALLENGE
The Company is targeting at least 50kozpa of gold production from the mine and a further 20kozpa of supplemental ore from its satellite Tarcoola deposit.
Based on the existing Challenger Mineral Resource estimate of 277koz of gold, we see the potential for an initial 3.5 year mine life with a number of growth opportunities close, and lateral, to existing development.
Our modelling suggests the potential for WPG to generate $14.6m in free cash in FY17, $37.3m in FY18 and $42.7m in FY19.
The Company will likely use some of this cash to explore new opportunities as well as look to develop its large Tunkillia gold project.
WPG has a solid team of mining professionals with a broad range of mining experience who have a proven track record of success.
We are initiating coverage of WPG with a Speculative Buy rating and target price of $0.15/sh.
Building an Emerging Gold Producer:
WPG recently acquired 100% of the Challenger gold mine through purchasing the remaining 50% from PYBAR for $9m.
WPG has re-published an updated Mineral Resource of 945kt at 9.11g/t Au for 277koz gold and has provided FY17 guidance of 50koz of production from Challenger.
In addition, the Company recently published an updated feasibility study for the development of the Tarcoola gold project, which has the potential to add output of 20kozpa.
Mining is expected to commence towards the end of 2016 with the ore from Tarcoola to be processed over 3 years at Challenger which is located some 165km away by road.
Backing the Team:
The WPG team has a successful track record of delivering for shareholders. The Company is led by Martin Jacobsen as Managing Director/CEO who has extensive gold experience.
Bob Duffin is Executive Chairman and has 40 years’ experience in mining.
The most significant return for the Company was in 2011 when the Company sold its South Australian iron ore assets for $320m.
The majority of the sale value was returned to shareholders.
We have determined a Net Asset Value (NAV) for WPG of $0.15/sh.
We have assumed that WPG produces c.54koz of gold in FY17.
All-In-Sustaining Costs are estimated at $1,360/oz for FY17 falling to c.$1,100/oz by FY19 which is partially due to accessing higher grade areas.
There is potential to extend mine life through accessing Challenger Deeps to which WPG has secured 100% of the rights.