RE:RE:RE:RE:RE:TD maintained a buy rating. I expect to see gold to appreciate (go up) in price:
a) slower pace of interest rate increases
b) Inflation to stick around for a few years (cost push inflation = wage driven) which means all commodities should go up.
c) US dollar weakness - Expect a big fight on raising the debt ceiling and expecting the US to come close to defaulting on debt. China & Russia will be successful in getting transactions for oil to be done in currencies other than US $.
All thes things are good for Gold...
So why divest from Wesdome where they hold 2 of the top 3 highest grade gold mines in Canada.?
In Real Estate... Location, Location, Location.
In Business... Management Management, Management.
I believe in the properties... no question they are good. But managment fumbled and worse yet did not communicated with the owners (shareholders) in a more transparent way. So now I'm from Missorri.. known as the "Show Me" state.
I'll watch and see how they manage during what will be a terrible year in 2023. They will loss money hand over fist at Kiena. It will likely cause the entire company to bleed cash. When a company bleeds cash their financial and operationals capacity/flexability becomes constrained. They have few options available.
They already raised 150 Million in debt which increased vulnerability. The ATM has no limit on the number of shares or minimum price. If they haven't already exercised the program and gotten the entire 100 million which would have been a dilutionary effect of 6%... The lower the price goes the more stock they must issue to get $100 million. Thats terrible for a company who was expecting after tax 95% IRR on Kienna.
Now we are going to see a huge loss. I haven't done a revised financial model... yet. The company had a valuation of between 1.4-1.8 billion for the last number of years. I considerred it fair... witith upside opportunity.
But if you dilute SH $100 million... after torpedoing the value of the company by 20% in a single day due to operational mismanagement. And if they didn't raise the 100 million before yesterdays news release... then I would have a serious concern and questions. The ATM dilution at $10 would be... 6% at $6.5 it is 10%... at $5.00 it is 14%.
So who will buy the new $100 million in stock and when at what price? Will it be institutions? Family? Friends? Management? Management knew what would happen after yesterdays news release. They had to have know. Why they came up with the ATM a day after commercial production achieved at Kiena? I'm just asking questions... but so far it doesn't smell right.
Pure Gold was a scam in my opinion. Hope Bay was a great property and had bad management which caused it to fail.
Wesdome has a great property. Duncan and his team have a good reputation and he has been successful in the past. So now I cash in my share for 1/3. I will do some sole searching and decide if I will park another 1/3 of my investment. I still like the property so I'll keep 1/3.
So to managment I say "Show Me!"
1) Did you issue your 100 Million before yesterdays news release? My guess is no... because those investors might think they were gamed by mgmt. I think they will do it after the news release. I assume we will be diluted 10-15%.
2) Will they execute on Eagle successfully to carry the cash burn at Kiena. I'm sure Kiena will burn cash for the next year.
3) Will they complete the ramp in the next year? On budget? On time?
4) Will they be able to progress mining at Kiena at a healthy tonnes per day (TPD) or will unstable ground hamper operations?
5) Management doesn't own much stock... will they buy meaningful amounts of stock at these prices? Or more likely will they issue themselves some options? No risk to them to do that!
6) Can they get from A to B before they run out of runway?... Same as will they survive to the end of the year before they run out of money? They had to go raise equity which means raising debt was too hard... The banks would have said too much risk.
7) Maybe another mining company is willing to take the 100 million ATM to get 10% of the stock and buy up 20% on the market and come with an offer to taker over Wesdome in an opportunistic move.
So "Show me":
1) Show Me You can manage operations successfully on time and on budget...kitchen sink sandbagging and all
2) Show Me the exploration success? Bougo anyone? Another Reidel Shear anyone?
3) Show me you will be here at the end of the day with a great opportunity at Kiena. Don't give me a distressed sale to a larger mining company.
4) Show Me their is value still left in the company.