In a March 13 research note, analyst Andrew Mikitchook reported that BMO Capital Markets increased its target price on Wesdome Gold Mines Ltd. (WDO:TSX) to CA$6 per share from CA$4.75 on news of a potential throughput increase at its Eagle mine. The Outperform-rated stock is currently trading at around CA$4.36 per share.
The boosted throughput that may be feasible, up to 800 tons per day, would come from a newly discovered eastern parallel zone that is close to the shaft infrastructure, Mikitchook explained. At that higher throughput rate, the underground mine could produce more than 100,000 ounces a year (100 Koz/year) versus the 72–80 Koz/year that management guided to for 2019.
The analyst highlighted that this new eastern parallel zone demonstrated initial high-grade intercepts of 41.4 grams per ton (41.4 g/t) over a 4.2 meter (4.2m) width and 24.3 g/t over 1.5m. The zone remains open up and down plunge and along strike. Wesdome intends to further test it this year.
For 2019, management has guided to a year-over-year production increase and "some of the highest grades mined at Eagle," at 15.5–16.5 g/t, moving toward stronger grades in H2/19, Mikitchook pointed out. For these reasons, "mining performance from Eagle will be topical in 2019."
Mikitchook also noted exploration remains a priority and catalyst for Wesdome with 114,000m planned for Eagle plus 59,000m for Kiena.
He concluded with, "Wesdome remains a compelling name for a takeover target as it gains visibility to producing 200 Koz annually in a top mining jurisdiction, with a track record of exploration success."
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Disclosures from BMO Capital Markets, Wesdome Gold Mines, March 13, 2019
IMPORTANT DISCLOSURES
Analyst's Certification
I, Andrew Mikitchook, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Company Specific Disclosures
Disclosure 16: A research analyst has extensively viewed the material operations of Wesdome Gold Mines.
Disclosure 17: Wesdome Gold Mines has paid or reimbursed some or all of the research analyst's travel expenses.
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