In an April 3 research note, analyst Ryan Walker reported that Echelon Wealth Partners again chose Wesdome Gold Mines Ltd. (WDO:TSX) as a Top Pick for the quarter, for the fifth consecutive time.
"We contend that further upside remains with several key catalysts to come in 2019," he wrote.
With the recent drop in the share price and in light of the upcoming catalysts, now is a good point to get into the stock or add to one's position, Walker indicated.
He attributed the decline in large part to an increased short position resulting from the market expecting Wesdome to perform an equity raise, along with pressure on the gold price. "A raise is not likely, even though the company intends to fund exploration efforts in 2019 with cash flow," he stated. The company ended Q1/19 with $27.8 million in cash.
One reason for naming Wesdome a Top Pick, Walker highlighted, is the fact it is "delivering on increased 2019 guidance." It reported Q1/19 production of 19,010 ounces, above Echelon's forecasted 17,309 ounces. With this performance, the company is well on its way to achieving H1/19 guidance of 31–35,000 ounces.
The production beat is attributed to a higher-than-expected grade of 18.5 grams per ton (18.5 g/t) at Eagle River. It exceeded Echelon's projected 15.5 g/t grade and Wesdome's own guidance of 15.5–16.5 g/t. "The grade outperformance reflects early mining of the high-grade 303 lens," Walker explained.
Further upside remains from Wesdome's continuing exploration efforts, Walker pointed out. In anticipation of an updated resource estimate sometime in H2/19, the company plans to undertake an "aggressive" drill program both at Kiena, where a restart decision is anticipated later in the year, and at Eagle River.
The plan for Kiena is 50,000 meters (50,000m) of underground drilling with five rigs and 9,000m of surface drilling, for which the budget is CA$26.9 million.
At Eagle River, Wesdome plans 51,000m of underground exploration drilling, at a cost of CA$6.9 million, and 43,000m of definition drilling.
Walker concluded that for Wesdome in 2019, "growing production and high-impact exploration drilling [will] fuel further upside."
Echelon has a Speculative Buy rating and a CA$6 per share target on Wesdome, whose current share price is around CA$4.75 per share.[NLINSERT]
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Disclosures from Echelon Wealth Partners, Wesdome Gold Mines Ltd., April 3, 2019
Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
I, Ryan Walker, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
Is this an issuer related or industry related publication? Issuer.
Does the Analyst or any member of the Analyst’s household have a financial interest in the securities of the subject issuer? NoThe name of any partner, director, officer, employee or agent of the Dealer Member who is an officer, director or employee of the issuer, or who serves in any advisory capacity to the issuer. No
The name of any partner, director, officer, employee or agent of the Dealer Member who is an officer, director or employee of the issuer, or who serves in any advisory capacity to the issuer. No
Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No
Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer? No
During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? No
During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? No
Has the Analyst had an onsite visit with the Issuer within the last 12 months? Yes. Yes. Kiena Mine Complex, Quebec – underground mine, mill, and ancillary buildings (July 18, 2018)
Has the Analyst or any Partner, Director or Officer been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No
Has the Analyst received any compensation from the subject company in the past 12 months? No
Is Echelon Wealth Partners Inc. a market maker in the issuer’s securities at the date of this report? No