Target Price Raised on 'Potential Acquisition Target'

The Gold Report - Streetwise Exclusive Articles Fu |

Source: Streetwise Reports   07/25/2018

An Eight Capital report reviewed the miner's goals for and progress on two of its assets in Quebec.

In a June 23 research note, analyst Craig Stanley indicated that Eight Capital raised its target price on Wesdome Gold Mines Ltd. (WDO:TSX) to CA$4.70 per share from CA$3. In comparison, the current share price is CA$3.71 per share. This boost in the price target comes following Eight Capital's site visit to Wesdome's Kiena project and discussions with management, which prompted a company model revision.

Wesdome aims to produce about 200,000 ounces per year (200 Koz/year) gold by increasing underground mining at its Eagle River project in Ontario and restarting production at its Kiena mine in Quebec. "Our valuation is dependent on significant resource and reserve expansion at both assets but believe recent exploration success warrants such an increase in these historically capital starved projects," Stanley noted.

As for Eagle River, Wesdome intends to supply the mill solely with underground ore versus with half underground/half open-pit ore as has been the case, Stanley relayed. This will require a material increase in resources and reserves along with further underground development, including that of working faces.

To achieve the additional resources and reserves needed, the company is currently conducting 50,000 meters (50,000m) of underground and 5,100m of surface drilling on the property. "We model additional reserves of 480 Koz at 10 grams per ton gold," wrote Stanley.

Regarding future production at Eagle, the analyst estimated the mine "will achieve steady-state throughput of 850 tons per day (850 tpd) starting in 2022 with no additional capital required outside of current sustaining capex levels."

As for Kiena, Wesdome is currently exploring the property, intending to complete 50,000m of underground and 11,900m of surface drilling. Stanley noted that "a steady stream of incredibly high-grade assays out of Kiena" will likely continue the recent upward movement in Wesdome's share price.

In addition, Wesdome is extending the exploration ramp at Kiena by 450m to "allow better testing of the possible plunge extension of the A zone to the northwest, southeast and down dip," Stanley explained. This is slated for completion in Q4/18.

Wesdome plans to release a resource estimate for Kiena by the end of 2018, which will encompass results from drilling in the auxiliary VC and S50 South zones.

With respect to future production at Kiena, Stanley wrote, "We model a mineable resource of 1 million ounces at 7.5 grams per ton gold at a throughput rate of 1,500 tpd, producing 111 Koz/year, starting in Q4/20 and ramping up through 2021."

Stanley concluded the report by pointing out that Wesdome, with two Canadian assets having the potential to produce 100+ Koz of gold, is a takeout target. This is particularly true of midcap miners wanting to boost production in a mining-friendly jurisdiction. "We believe large and mid-cap gold producers are closely following Wesdome's progress at Kiena," Stanley said.

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Disclosures from Eight Capital, Wesdome Gold Mines, Target Revision, July 23, 2018

Conflicts of Interest: Eight Capital has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research and other businesses. The compensation of each Research Analyst/Associate involved in the preparation of this research report is based competitively upon several criteria, including performance assessment criteria, the quality of research and the value of the services they provide to clients of Eight Capital. The Research Analyst compensation pool includes revenues from several sources, including sales, trading and investment banking. Research analysts and associates do not receive compensation based upon revenues from specific investment banking transactions.

Eight Capital generally restricts any research analyst/associate and any member of his or her household from executing trades in the securities of a company that such research analyst covers, with limited exception.

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• the views and recommendations expressed herein accurately reflect his/her personal views about any and all of the securities or issuers that are the subject matter of this research report;

• his/her compensation is not and will not be directly related to the specific recommendations or views expressed by the Research Analyst in this research report;

• they have not affected a trade in a security of any class of the issuer whether directly or indirectly through derivatives within the 30-day period prior to the publication of this research report;

• they have not distributed or discussed this Research Report to/with the issuer, investment banking at Eight Capital or any other third party except for the sole purpose of verifying factual information; and

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The Research Analyst involved in the preparation of this research report does not have any authority whatsoever (actual, implied or apparent) to act on behalf of any issuer mentioned in this research report.

Disclosures are available here.

( Companies Mentioned: WDO:TSX, )

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