Western Exploration Inc.'s (WEX:TSX.V;WEXPF:OTC) newly released 2023 stepout drill data from its Aura gold-silver project in Nevada boasted bonanza grades, reported Fundamental Research Corp. analyst Sid Rajeev in a Jan. 10 note.
"We believe initial results indicate potential for resource expansion," Rajeev wrote.
Stock undervalued, offers 152% gain
Fundamental Research maintained its Buy rating on the Reno, Nevada-based mining company but lowered its fair value price to CA$2.07 per share from CA$3.48 to account for share dilution, noted Rajeev.
Currently, Western Exploration is trading at a 31% discount, the analyst added, at about CA$0.82 per share, or CA$28 per ounce.
"We believe Western Exploration stands out with high-grade projects, a strong management/board and the backing of Agnico Eagle," Rajeev commented.
The difference between the current and fair value prices reflects a compelling potential return on investment of 152%.
Bonanza grades encountered
Two stepout holes, drilled 140−250 meters northeast of Aura's Gravel Creek, returned impressive grades of gold and silver, Rajeev highlighted. Specifically, hole WG457 demonstrated 257 g/t gold and 1,655 g/t silver. Hole WG456 showed 35 g/t gold and 2,800 g/t silver.
Adjacent to Gravel Creek, these results delineated an area of epithermal mineralization about 0.55 kilometers by 0.35 kilometers in size. This suggests potential exists for expanding the existing resource, now comprising 652,000 ounces of gold equivalent (652 Koz Au eq) in the Indicated category and 665 Koz Au eq in the Inferred category.
The three deposits
Gravel Creek is one of Aura's three deposits and hosts underground high-grade sulfide resources. Extending 600m along strike and more than 400m in depth, this deposit hosts 52% of Aura's resource estimate.
Another Aura deposit is Wood Gulch, which along with Gravel Creek is 8 kilometers away from the third deposit, Doby George that hosts near-surface high-grade oxide resources. Western intends to advance Doby George before the other two.
"We believe Doby George can be advanced to production quickly, with a low initial capex (less than $50 million)," wrote Rajeev. "Based on its existing resource, we envision the project operating for nine years (40−50 Koz per year) with a relatively low opex ($800 per ounce)."
Will need more capital
Rajeev noted that at year-end 2023, the mining company had US$1.2 million (US$1.2M) in working capital. Thus, Fundamental expects Western Exploration will need to raise equity on the order of CA$3M-plus sometime this year.
What to watch for
Investors can expect catalysts from Western Exploration throughout this year, including metallurgical test results, Rajeev wrote. A resource update each on Doby George and on Gravel Creek are slated for completion in Q1/24−Q2/24, followed by drill results from these two deposits in Q3/24−Q4/24. Subsequently, a prefeasibility study for Doby George is planned, to be finished in Q4/24−Q1/25.
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