WAF - West African Resources

[Sean K]

Posted Oct 1
WAF comments start 6.00

I've been topping up down here too. A risk reward play with WAf goldies and agree with BtL that this seems to be quality and has been overly sold off for no discernable reason other than the general market malaise towards 'juniors' and fear of jurisdiction. The exception is PRU at the moment with MC still at $2.4b with $1b in the bank = about $3.5b EV producing about 500Koz pa. A different beast to WAF obviously, but just doing a back of the beer coaster number crunch WAF MC of $750m less debt (whatever that is now) with little more dilution due to incoming cash and will be a 400M producer in a couple of years doesn't quite look right. With the M5 UG upside SS to be out in the next month or so that might be a catalyst to put it back on track.

 

[finicky]

Not brimming with enthusiam but grudgingly risked an add of 5,000 shares @ 0.735
Chance of a swing low, although I'm buying as an investment not a trade. Small bodied candles the last few weeks and price has popped back into my interpreted bullish falling wedge that started in January 2023. It was the plunging break of the wedge in the first week of October, 4 weeks ago, that almost got me to sell and there are other bearish aspects of the medium term weeky chart. It's a gamble on the Junta.

Held

WEEKLY

 

[Sean K]

Not brimming with enthusiam but grudgingly risked an add of 5,000 shares @ 0.735
Chance of a swing low, although I'm buying as an investment not a trade. Small bodied candles the last few weeks and price has popped back into my interpreted bullish falling wedge that started in January 2023. It was the plunging break of the wedge in the first week of October, 4 weeks ago, that almost got me to sell and there are other bearish aspects of the medium term weeky chart. It's a gamble on the Junta.

Held

WEEKLY
View attachment 164586

I think a $1.5b MC will be warranted by first gold pour at Kiaka. So, double current SP. If PRU can have a $3.5b EV producing 500Koz pa then this should be 80% of that really. What's that? $2.8b? So, I'm being conservative. Junta shmoonta, they'll get their cut.

 

[Sean K]

Backed up the train on this oversold puppy last week. Gold stocks haven't really responded to the rise in POG in relation to the Gaza kerfuffle, but with the ground incursion just started, I think the stocks will start to follow POG belatedly. If there's a sudden cease fire then this theory is in the toilet.

The underlying long term macroeconomic situation will eventually push POG higher but I think there's a short term opportunity here too.

The easy money might have already been made just trading gold since the start of the war with an approximate $200 USD rise and $300 AUD rise, but with US forces being attacked by Iranian proxies across the ME, this could get out of hand pretty quickly. It hasn't been widely reported but the US have been bombing Iranian backed positions across the region over the past week. I think they've only just started. The French are particularly keen to get involved for some reason too. Maybe their historical ties to Syria and Lebanon after WW1 have brought them in.

On top of that, I'm anticipating the M5 UG SS to be put out in November which will surprise to the upside - I hope. It's going to add significant LOM to Sanbrado, but will cost some additional development capex I guess. Should be good for longer term production profile and could mean with Kiaka it's a 20 year 400Moz pa producer, which is substantial.

 

[Sean K]

Good move buying more of this last week...

This is not good, even though it only increases AISC by a few bucks.

BF taking advantage of higher gold prices. I suppose being unhedged means that if gold keeps running up it's good for everyone. I don't think Mr Market is going to like this very much...

The new royalty rates take effect in November 2023 and are expected to increase WAF’s 2023 AISC by approximately US$6 to US$8 per ounce at current gold prices. WAF maintains 2023 production and cost guidance of 210,000 to 230,000 ounces of gold at AISC of less than US$1175 per ounce.

WAF does not expect the royalty changes to impact the debt funding of our 7.7 Moz Kiaka gold project, given the bank funding model uses conservative gold price assumptions in the range of US$1,700/oz over the period of the loan. WAF expects to make the first drawdown under the loan facility by the end of 2023. Kiaka construction remains on time and on budget with first gold schedule for H2 2025. West African

Executive Chairman Richard Hyde commented: “The new royalty rates follow extensive consultation between mining companies and the Ministry of Mines for Burkina Faso. The rates are capped at 7% over US$2,000 per ounce, which results in a modest $6 to $8 increase per ounce in WAF’s 2023 AISC per ounce at current gold prices. “WAF remains on-track for 2023 guidance of 210,000 to 230,000 ounces of gold at an AISC of less than US$1,175/oz.”

 

[mullokintyre]

Good move buying more of this last week...

This is not good, even though it only increases AISC by a few bucks.

BF taking advantage of higher gold prices. I suppose being unhedged means that if gold keeps running up it's good for everyone. I don't think Mr Market is going to like this very much...


View attachment 164875

The new royalty rates take effect in November 2023 and are expected to increase WAF’s 2023 AISC by approximately US$6 to US$8 per ounce at current gold prices. WAF maintains 2023 production and cost guidance of 210,000 to 230,000 ounces of gold at AISC of less than US$1175 per ounce.

WAF does not expect the royalty changes to impact the debt funding of our 7.7 Moz Kiaka gold project, given the bank funding model uses conservative gold price assumptions in the range of US$1,700/oz over the period of the loan. WAF expects to make the first drawdown under the loan facility by the end of 2023. Kiaka construction remains on time and on budget with first gold schedule for H2 2025. West African

Executive Chairman Richard Hyde commented: “The new royalty rates follow extensive consultation between mining companies and the Ministry of Mines for Burkina Faso. The rates are capped at 7% over US$2,000 per ounce, which results in a modest $6 to $8 increase per ounce in WAF’s 2023 AISC per ounce at current gold prices. “WAF remains on-track for 2023 guidance of 210,000 to 230,000 ounces of gold at an AISC of less than US$1,175/oz.”

I take the view that its a non material impost. The price of gold changes on a daily bases by more than the royalty increases, so I am not too worried.
I have no doubt that in the "consultations" with the BF government, there will have been some other concessions made.
I would buy more , but already have a sizeable enough chunk, don't like having any more than 8 to 10% of my portfolio in one stock.
Mick

 

[Sean K]

I take the view that its a non material impost. The price of gold changes on a daily bases by more than the royalty increases, so I am not too worried.
I have no doubt that in the "consultations" with the BF government, there will have been some other concessions made.
I would buy more , but already have a sizeable enough chunk, don't like having any more than 8 to 10% of my portfolio in one stock.
Mick

I've been trying to limit single specs to 5%.

 

[finicky]

Might be a positive. The gentlemen of distinction have dipped their snouts in the trough and have stolen something manageable for the company and done it in a measured way. So to me it suggests some stability for a while.

Held

 

[Sean K]

Might be a positive. The gentlemen of distinction have dipped their snouts in the trough and have stolen something manageable for the company and done it in a measured way. So to me it suggests some stability for a while.

Held

Seems to have seen a bottom around 70c and breaking up through some resistance.

I thought backing up the train at the end of last month was looking like a foolish decision after the royalty change.

Still maybe another coup to erupt at any moment too though.

 

[mullokintyre]

I suspect some of the folks who dumped out of SSR after the last announcement have rotated into WAF.
Mick

 

[Sean K]

WAF looks like it might be on the mend. Seems to have broken that downward resistance trend and held up above some support. Might be benefitting from the M&A type news in WAf at the moment.

This feels like a sort of orphan stage of The Lassonde Curve with the development of Kiaka, even though they have Sanbrado running nicely. Might be some risk to execution to Kiaka factored in and questions about whether it comes in on time and budget and produces as forecast.

MUFG have been running up and down the registry recently which is a bit strange.

 

[Sean K]

Late run from WAF in the monthly comp but the leaders are way too far ahead.

POG run has obviously helped but looks like WAF is off the floor and breaking various resistance points on the way back up.

 

[Sean K]

Fingers crossed 86c ish holds which is probably equivalent to some POG support levels above $2K.

 

[mullokintyre]

I sold a third of mine yesterday at 0.977.
I am happy for them to drift down to 86 for me to to buy them back again.
Mick

 

[Sean K]

I sold a third of mine yesterday at 0.977.
I am happy for them to drift down to 86 for me to to buy them back again.
Mick

Nice work. Old ATH's in my target to don parachute. One day.... maybe

 

[mullokintyre]

I sold a third of mine yesterday at 0.977.
I am happy for them to drift down to 86 for me to to buy them back again.
Mick

Bought that third back this morning at 0.885.
Waitng for next lift up to play again.
Mick

 

[mullokintyre]

Market thought otherwise, but I thought WAF might have had a bit of a spurt this morning on the following news.

Given that it will be using the same fleet for haulage as is already used at M1 South, the Capex will be reduced.
It suggests that this inital MRE is going to be increased with further drilling.

Will keep nibbling at these lower prices.
Mick

 

[Sean K]

Market thought otherwise, but I thought WAF might have had a bit of a spurt this morning on the following news.
View attachment 167138

Given that it will be using the same fleet for haulage as is already used at M1 South, the Capex will be reduced.
It suggests that this inital MRE is going to be increased with further drilling.
View attachment 167139



Will keep nibbling at these lower prices.
Mick

Gold correction probably dampened any excitement for this.

I had no expectations with this study in regards to tonnage and ounces. What seems to be very positive is that the entire strike looks like it goes to depth so LOM will probably be increased over time with more drilling.

 

[Sean K]

Fingers crossed the old resistance is now support. It's had a very good run since the bottom, so not sure.

I'm expecting gold to go OK next year so a couple of my yearly comp picks are gold. If POG does continue to rise, as all sane people think, then I anticipate ATHs at some stage here.

Not sure what the upside catalysts are here except for POG run. Maybe more underground drilling success but I think it's mostly factored in. Can't see them being taken over now. They might try and take out ORE but that's no good for WAF. So, just counting on POG going higher and no more coups really.

 

[Sean K]

This is my 'safe' pick for the 2024 comp, proudly sponsored by Sean K inc.

It has the same ounces as DEG but is more than half the MC. I know there's a discount for WAf miners compared to WA but this is not justified, especially when gold is going to $2700 next year. Plus, WAf will go through a period of relative stability with only five x coups, instead of the regular 10.

I would have preferred to pick the GDX and/or GDXJ, but that's a bit boring.

Of course, this means everyone should short the gold sector.