Western Exploration Inc. (WEX:TSX.V; WEXPF:OTC) again caught the attention of Paradigm Capital at the Sept. 9 to 12 Precious Metals Summit at Beaver Creek in Colorado, reported Senior Analyst Don MacLean in a Sept. 17 research note.
"WEX offers leveraged exposure to a district-scale Nevada gold-silver growth story," MacLean wrote.
In Nevada, about 120 kilometers north of Elko, the U.S.-based explorer is advancing its 100%-owned Aura project, host of three deposits: Doby George (oxide, near surface, heap leach), Gravel Creek (high grade, gold-silver sulfide) and Wood Gulch (past producer, oxide/sulfide).
"We have been following Western Exploration for some time now and are impressed by the progress it has made in the past year unlocking Nevada's emerging high-grade epithermal potential," MacLean commented.
Expanding the Resource
MacLean touched on the status of each deposit. Doby George is post preliminary economic assessment. The study, done in May, outlined an open-pit, heap-leach operation producing 7,500 tons per day of 1 gram per ton gold (1 g/t) over five years and generating more than US$100 million (US$100M) in cash flow per year at spot levels. At US$2,150 per ounce (US$2,150/oz) gold, the after-tax net present value discounted at 5% would be US$71M. At US$3,000/oz gold, it would be US$211M.
As for Gravel Creek, it now is a material, high-grade gold-silver system thanks to Western Exploration's work there. The mineral resource estimate (MRE), updated in June, consists of 254,000 ounces of silver equivalent (254 Koz of Ag eq) in the Indicated category and 683 Koz Au eq in the Inferred category. The new MRE reflects 54% more Inferred ounces than the previous one..
Further, drill programs in 2023, 2024 and this year confirmed bonanza-grade veins, up to 75 g/t gold and more than 4,000 g/t silver, at the Jarbidge rhyolite discovery. These support open-ended expansion, MacLean wrote.
Regarding the past-producing Wood Gulch, the company is drill testing it along the Tomasina Fault, a 3-km-long untested structural corridor similar to but shallower than Gravel Creek.
"Collectively, Western is targeting greater than 2 Moz gold and 30 Moz silver in its next resource update," reported MacLean.
Other Standout Elements
MacLean noted that Western Exploration has a CA$50M market cap and about CA$3.5M in cash. It has big name backers, including Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) with 12% and Golkonda with 38%. Its management team has exploration experience, having been involved in past discoveries made at Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) and Meridian Resources Corp. (TMR:NYSE) projects in the past.
Expect Lots of Explorer Financing
The analyst discussed how explorers as a group have fared during the past three years. He pointed out that the week in which the Precious Metals Summit was held, explorers were top performing, up 6%, on par with seniors. Weeks with this type of explorer movement have been few since the upcycle started in September 2022.
"The ongoing string of record-breaking gold prices is finally building sufficient investor confidence to lift interest on the small cap end of the gold equity spectrum," MacLean wrote.
The explorers are up 73% year to date, but they still lag the seniors significantly. Even so, wrote MacLean, they still are doing much better this year than they did in the past two years. They dropped 21% in 2023 and 18% in 2024 despite the gold price being up 13% and 27%, respectively.
"We can expect a very active explorer financing autumn," MacLean wrote. "We will see whether pent up explorer demand can offset the normal performance dampening that has occurred, historically, in the face of a substantial wave of financings."
Paradigm expects the small caps to continue to do well, supported by a strong gold price environment.
"All indications are that the wind is finally at the back of the small-cap golds after nearly a decade of it being in their face," wrote MacLean.
According to Paradigm's gold cycle model, an average upcycle could lead to US$4,750/oz gold in the next year or so. A median cycle would have peaked at US$3,190/oz.
"However," MacLean wrote, "today's circumstances feel neither median nor average."
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