(MENAFN- ProactiveInvestors - Australia) WPG Resources Ltd (ASX:WPG) has received a Buy recommendation from broker Veritas Securities Limited.
Veritas applied a valuation of $0.14 per share, almost double WPG's last traded price. The following is an extract from the report.
First full quarter of production at Challenger
- WPG has announced SQ16 Challenger production of 12,138 ounces at an AISC of $1,493/oz (VSL 12,631oz at $1,391/oz) which includes the ramping up of production to late July of the Challenger u/g.
- Challenger ore was blended with the surface low grade stockpiles as planned, resulting in an average milled grade of 2.64g/t Au and a slightly lower recovery at 94.5% (VSL estimate: 2.75g/t Au, 95.0% recovery).
- Underground development which is fully expensed into the cash costs at Challenger totalled 1,213m. Development and near mine exploration drilling totalled 8,733m into Challenger West, CSSW and Aminus returning high grade intervals including 1.51m at 75.8g/t Au and 4.61m at 16.3g/t Au at Challenger West and 0.88m at 55.4g/t Au and 0.3m at 55.2g/t Au at CSSW.
- Cash at the end of the quarter was $12.1m and the average gold price received was $1,775/oz on 11,425oz sold.
Tarcoola and Western Gawler JV
- WPG is awaiting final approvals prior to commencing mining at Tarcoola. We have not as yet factored in the feasibility AISC's of $916/oz (VSL $1,100/oz) into our model as we await first production. Once in production Tarcoola will add ~20kozpa of recovered gold with ore reserves currently at 71koz at 3.1g/t Au.
- WPG has resolved the ownership dispute with JV partner Tyranna Resources over the new mining lease down plunge of Challenger and the adjoining northern section of EL5661. WPG has confirmed its right to 100% of all minerals in the EL5661 and has also agreed to ownership of the tenements subject to the JV be transferred to Tyranna.
- Ongoing drilling by the JV continues to confirm the potential of satellite ore from a number of prospects within a 50km trucking distance to the Challenger mill.
Financials
- The SQ16 has been a ramp up quarter to full production from the Challenger underground and also an increase in ownership to 100% from 1 August 2016. The inclusion of Tarcoola and a continuing increase in the underground head grade at Challenger in the DQ16 will provide further on budget production with a declining cash cost towards our target of ~ $1,300/oz AISC.
Recommendation and Veritas comment
- We continue to recommend a BUY based on our fully diluted NAV of $0.14 per share, which incorporates production for 4 years based on the current Challenger M+I resource and Tarcoola reserves.
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