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Wishbone Gold PLC: THE INVESTMENT CASE

Wishbone Gold ready to reverse gently into gold supply

Wishbone has supply agreements with miners based in Peru, Ghana, Chile and Colombia.
picture of Chinese flag and gold
INVESTMENT OVERVIEW: WSBN The Big Picture
China is where a lot of gold is heading

Wishbone Gold PLC (LON:WSBN) is a gold shipper based in Dubai that matches buyers with small producers in Africa and South America.

It began operating in August 2016 and finished the year out by shipping 105 kilos (3,380 ounces) in total in December, its peak month. In 2017 it continued to expand its trading subsidiary Black Sand, after it delivered total revenues of US$4.2 mln for 2016. During the first quarter of 2017 revenues rose to US$2.5 mln, with chief executive Richard Poulden anticipating further improvements in the coming quarters.

Overall 2016 had been a successful year for Wishbone with volumes good, though changes to India’s import rules had affected the market, he said, and in results released in June 2017 argued that the market was now providing "an increase in the profitable opportunities for the company." 

India and China are the two largest physical markets for gold such as jewellery, bars and coins.

Watch: Wishbone Gold has a great future, says Poulden

Read: Wishbone Gold gives loan to Ghana supplier

“The gold market remains extremely strong in volume terms which makes us believe that the oft quoted decline in production is failing to monitor the small producers which is our target supplier market.

“The traffic is inexorably east with small premiums over the world spot price appearing from time to time in India and Hong Kong."

Wishbone has supply agreements with miners based in Peru, Ghana, Chile and Colombia.

Subsidiary Black Sand’s management visited Peru and Chile recently, which would provide more opportunities for the company said Poulden while its early stage projects in Honduras and Ghana should move forward.

 

New funding in place

 

 

In August 2017 the company raised new funds via an £800,000 funding through Riverfort, and also put in place an equity drawdown facility totalling US$2 mln. "This is the first stage in an overall funding relationship with Riverfort that can lead to the funding of new deals at the project level," said Poulden.

 

 

Right place at right time

If you want to ship gold Dubai is the place to be. An estimated 40% of physical gold traded in the world moves through Dubai.

This gold goes from west to east, from south to north and into and out of Europe - much of the trade ended up in China, but there was also significant business volumes done with India.

In short, Dubai is a global hub for the gold trade and anyone looking to enter the market would do well to base there.

This was the rationale that saw Wishbone acquire  Black Sand, a company with a licence to trade gold, precious metals and gemstones in Dubai.

The thinking is pretty clear, Poulden explains.

At this stage the trading business in Dubai is all about moving gold on from a seller to a buyer.

For now Wishbone itself won’t be taking speculative positions in the market, although that may change at a later date.

Rather the idea is to pick up the 2-4% margin on each transaction, to conduct three or four transactions per month, and to build a cash positive business from there.

Currently Black Sand’s main network of suppliers are in South America where two contracts are already in place.

Poulden believes that using his network of global contacts, gleaned from his time at Sirius Minerals (LON:SXX) and elsewhere, the group may be able to expand this and source more from other regions.

More importantly, Poulden believes it is at the stage where it can 'reverse engineer' into the supply chain by offering equipment loans to some of its small suppliers.

It has started to do this 'on a gentle basis already' but by the end of 2017 he wants to have ‘several vertical integration strategies brought to fruition.” 



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Wishbone Gold PLC Timeline

Newswire
February 10 2017

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