Western Exploration Inc. (WEX:TSX.V; WEXPF:OTC) will drill the Gravel Creek deposit at its Aura gold-silver project in Nevada this summer, targeting late June to start, Chief Executive Officer (CEO) Darcy Marud said in a May 16 interview. Gravel Creek is one of three deposits at Aura; Doby George and Wood Gulch are the others.
"If we're successful, we'll have identified a subparallel Gravel Creek deposit and end up with two really high-quality drill targets of Gravel Creek, that being this new one plus Jarbidge that we were drilling last year," Marud told Chen Lin of What is Chen Buying? What is Chen Selling?
In the interview, Marud described the upcoming drill program, reviewed the recently released Doby George preliminary economic assessment (PEA) and talked about expanding the resource and permitting.
To Test the Theory
The Nevada-based explorer plans 15–20 drill holes at Gravel Creek, targeting the Tomasina Fault zone, 1 kilometer to the west, and part of Wood Gulch. Marud noted that Wood Gulch is thought to be "an identical, subparallel deposit to Gravel Creek but much shallower," starting at surface.
The Tomasina target is known to be about 3 kilometers long and extends to depth, but it has not been drilled previously. However, some holes adjacent to it, drilled between 2013 and 2017, returned mineralization, up to 11 grams per ton (11 g/t) of gold and 300 g/t of silver.
Significant Cash Flow Potential
The Doby George PEA, reported Streetwise Reports, outlined a straightforward open-pit, heap-leach operation producing 248,000 ounces (248 Koz) of gold over a four and a half year life of mine.
In the base case, using a US$2,150 per ounce (US$2,150/oz) gold price, the after-tax net present value (NPV) is US$70.7 million (US$70.7M), and the internal rate of return (IRR) is 25.4%. In the upside case, using US$3,000/oz gold, the NPV is $211.2M and the IRR is 62.2%.
"We were pretty excited about the results," Marud said.
Lundin changed his recommendation on Western to Hold from Buy while waiting to see how the drill results shake out in terms of resource expansion.
In the base case, 1 ton of ore generates a margin of almost US$50, which, Marud noted, is significant for this type of mine. The payback period is 2.7 years. In the upside case, the margin generated is nearly US$80 per ton. The payback period is 1.4 years.
"We've preserved that grade, which is what really drives the operating cash flow margins," noted Marud. "At over 1 g/t, the margins that this project can deliver at any gold price are significant. It produces a lot of cash flow no matter what the gold price is."
On an annual basis, the operating cash flow from this deposit is about US$112M per year, the CEO pointed out.
In the PEA, proposed production was kept at 7,500 tons per day to maximize the NPV, Marud explained.
As for costs, in the base case, they were US$1,160/oz; in the upside case, they were US$1,197/oz.
"It's a great PEA," Lin commented. "That's a big milestone for your company. And investors can start to put some numbers together."
Working to Improve on PEA
Now Western Exploration intends to bulk up the resource and has room to do so, noted Marud. In addition to the potential at Gravel Creek, there are the 100 Koz Wood Gulch oxide deposit and additional untested exploration targets at Doby George.
Further, as the project gets closer to the prefeasibility (PFS) stage, the company will look at ways to bring down the capex. Excluding working capital, estimated capex as of now is about US$115M.
"The operation offers significant potential leverage on a continued gold bull market," wrote Jeff Clark of The Gold Advisor.
As Western continues to derisk the project by advancing it toward a PFS, including the start of baseline studies slated for this year, the market value of Dolby George should increase, purported Marud. At a market cap of CA$30–35M, not a lot of value is being given to Doby George.
A bit further down the road, after the PFS, will be the permitting stage. At last determination in 2019, the federal and state permitting process would take 24–30 months, noted Marud. He made a few points about permitting.
One is that the company will only need to get permits for the pits because the heap-leaching facility and other infrastructure will go on private fee land. Western has a mineral lease on property immediately south of Doby George that it may buy at any time through year-end 2031.
Another point is that other projects on nearby U.S. Bureau of Land Management property have gotten permitted successfully. They include First Majestic Silver Corp.'s (AG:TSX; AG:NYSE; FMV:FSE) Jerritt Canyon and Anova Metals Ltd.'s (AWV:ASX) Big Springs.
"So there's a history of being able to permit mining operations, and of course, you know, in this part of Nevada, just north of Elko, we're in mining country," Marud said.
Gold Price Near $4,000 Predicted
Gold has been in a correction since it peaked at US$3,500/oz last month. According to the latest GDX chart, however, the bottom of the correction is in, purported Technical Analyst Clive Maund in a May 17 report. Gold looks ready to start an uptrend to new highs and thus is "at a great 'Buy spot.'"
Technical Analyst AG Thorson agrees that gold will reach all-time highs but purports it will drop lower first, in stairstep fashion, to about US$2,800/oz. (At last closing, the gold price was US$3,239/oz.) Based on its current pace of retreat, this descent will occur through mid-2025, he wrote in a May 16 FXEmpire article. He bases this prediction on his Gold Cycle Indicator having reached maximum cycle topping, which only happens once every few years. Historically after such an event, a correction of about 20% ensues before the next upleg. The current pullback is within a broader uptrend expected to reach new highs next year and beyond.
"Gold remains in a robust bull market, with prices projected to reach US$8,000+ in the coming years," Thorson wrote.
He pointed out that the miners remain significantly undervalued relative to the price of gold and will remains so until the GDX:GLD ratio breaks above the key resistance level near 0.235. Mining stocks have lagged but are expected to catch up and potentially climb to all-time highs in the coming quarters.
As for junior gold miners, Red Cloud Securities wrote in a May 2025 report, they have underperformed radically. Historically, they should be 60–120% higher than their current level.
Goldman Sachs Commodity Strategist Lina Thomas also went on the record forecasting new record highs for gold, driven by two key, ongoing factors. One is central bank buying, which is expected to continue for at least another three years. The other is investor flight to gold.
"While the key factor since 2022 used to be central bank buying alone, exchange-traded fund investors are now joining the gold rally," Thomas wrote in a May 15 article. "As both compete for the same bullion, we are expecting gold prices to rise even further."
Goldman Sachs predictions see gold rising to US$3,700/oz by year-end and if there's a recession, as high as US$3,880/oz.
Even against a favorable global growth background, Grace Peters, global head of investment strategy at JPMorgan, told Kitco News, a gold price north of US$4,000/oz is reasonable a year from now, based on emerging market central bank buying.
Ryan Stancil, Resource Stock Digest editor and contributor, wrote in a May 19 article, "Don't let the price pullback fool you, gold still has plenty of fight in it. This is a buying opportunity for a commodity that still has plenty of promise ahead of it."
The Catalyst: Drill Results
As CEO Marud noted in the interview, investors should watch for the start of Western Exploration's upcoming drill program slated for late June and then the release of the results later in the summer.
Experts: Larger Resource Needed
Brien Lundin of Gold Newsletter wrote on May 9 that the market's negative reaction to the Doby George PEA was unwarranted. Yes, the report outlines a smallish mining operation, but Doby George is only one of three resource-hosting areas at Aura. Thus, potential exists for expanding the resource and the operation. Investors seem to have overlooked this.
"Granted, Western's announcement could have made this point much better, with only a caption under a graphic in the news release making the point," Lundin wrote. "The actual story here is that these other targets should get pulled into the production story at Doby George."
Lundin changed his recommendation on Western to Hold from Buy while waiting to see how the drill results shake out in terms of resource expansion.
Jeff Clark of The Gold Advisor, shared similar thoughts in the May 8 edition. Less than ideal elements of the PEA, he wrote, are the modest base case NPV, the short mine life and the initial capex being higher than the NPV. However, he pointed out, "the operation offers significant potential leverage on a continued gold bull market," especially if the oxide gold resources from Wood Gulch can be incorporated.
Streetwise Ownership Overview*
Western Exploration Inc. (WEX:TSX.V;WEXPF:OTC)
"As such, I'll keep my overweight position in Western Exploration with the idea that future drilling can significantly increase the resource at Aura," Clark wrote. "If you see the potential here too, the stock's a Buy."
Ownership and Share Structure
According to Refinitiv, strategic entities own about 64% of Western Exploration. These include the Top 2 shareholders overall, Golkonda with 44% and Agnico Eagle with 14%. Insiders and management hold about 3%.
Institutional investors, Euro Pacific Asset Management LLC, Auramet Capital Partners, TXAU Ventures and U.S. Global Investors Inc., own about 12%. The rest is in retail.
The precious metals explorer has 45.43 million outstanding shares and 17.85M free-float traded shares. Its market cap is CA$33.77million. Its 52-week range is CA$0.62−1.49 per share.
Important Disclosures:
- Western Exploration Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Exploration Inc.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
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