Good afternoon
PMI in Germany, France better than expected and quite strong, while weaker in the US.
Equities looking ok - but German auto stocks down again on more tremors from Trump. Base metals slightly stronger - nickel up by 2% and looks like it will make a new closing high in A$ terms, at around 20660 A$/t or a fantastic 9,37A$/lb!
The next takeover....Dalradian Resources receives a 514 mill CAn$ bid. The company is developing a gold project in Ireland. Hi grades, but complicated approval process, from what I have heard.
West African Resources - the long awaited, updated resource estimate / feasibility study came out today! Excellent numbers: 76% increase in reserves ( 1.6 Mill oz at average grade of 2.4g ), 40% increase in resources ( 2.4 Mill oz at 1.8g ) - and wide open! For this estimate, all drilling incl April 2018 has been used - recent, positive results are not included and are believed to deliver another 1 year of high-volume mine life already.
The after tax NPV5% of the project, using a flat 1300 US$ gold price, is 405 Mill US$ / AISC of 551 US$/oz for the first 5 years / capex incl working capital and contingency 185 Mill US$ / only 16 month payback, and an IRR of around 50% after tax. Those numbers are outstanding! The market cap of WAF is 241 mill A$ as at today, incl 44 Mill A$ in cash....so effectively, the NPV 5 is about 546 Mill A$ at todays forex....that´s equivalent to an Enterprise Value of 79ct/share. These numbers give me hope again for a takeover-bid at 60ct or better. But obviously, the company is now targeting to develope the project themselves, with a view to start construction by the end of the year. And who knows - probably that´s the best value-add , at least for patient investors. Remember, that every additional year of mine life from underground will add at least 150 mill$ in pre-tax cash flow.
Interesting to note: Instead of using 5% as discount rate, I think it´s much more appropriate to use 10% . The NPV10 after tax for the project is still just above 400 Mill A$...vs today´s EV of 200 mill A$...again, leaving some very nice upside for investors or potential aquirers!
I am sticking to my old targets, and am hoping for prices of above 60ct this year on corporate action!
Have a nice weekend!
WS
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