RE:If I was Tony .... I would be in favour of KL targeting Wesdome,
only if it were to add value to KL. However, the financial metrics below suggest that such a purchase could dilute the production / reserves created by the KLG/NMI merger.
In the first instance, it should be noted from
Wesdome’s Feb 2017 presentation that the new discovery is 200/300 metres below the existing infrastructure. In the light of this, the capex and time to access
potentially provable reserves would come at a great cash and time cost to KL, over and above the uplifted current SP. This is in contrast to the Fosterville / Macassa quality grades.
However, the current valuation metrics, illustrated below, suggest that the current MV of Wesdome may include a high hope value for the new drillings.
https://wesdome.com/_resources/presentations/Corporate-Presentation.pdf Kiena Complex: New Discovery 2016 Four drills testing for repetition along a Z-fold interpretation 200 – 300 metres below existing infrastructure The current valuation metrics seem to be speculative and reliant on proving and accessing the potential at Kiena:-
| All in C$ | Source: Wesdome Feb 2017 presentation | Source: KLG/ NMI Merger Documents |
| EV / Production ounces | 6.0
$350m/58k (max 2017 ozs) | 4.4
($2.2b / 500k oz] |
| Price / 2017E cash flow | 18.5
$350m / $18.5m FCF
2016 Q3 $4.635m x 4 = $18.5m | 6.1 |