Wishbone Gold – Update
Innovative gold play providing artisanal miners with processing equipment to gain highly profitable gold off-take agreements
Wishbone Gold listed on AIM in 2012 as a gold exploration play. 2016 saw the business refocused on gold trading following the acquisition of Black Sand FZE, based in Dubai. This is a location which has quickly emerged as a leading global hub for the precious metals trade. The strategy is to reverse integrate down into the supply chain to gain a guaranteed supply of gold under long term contracts at highly attractive margins.
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Issues behind the share price collapse seem to have been solved
The past 12 months has seen the share price wilt due to the combined effect of delays at the maiden reverse integration project in Honduras combined with the ramifications of a funding arrangement. With the final completion of the Honduran plant expected by the year-end and the RiverFort finance deal now unwound, it looks as though the clouds have lifted.
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Rapid growth in gold trading using the Marc Rich/Glencore model
Wishbone is financing equipment to dramatically improve gold production for artisanal miners in countries like Honduras and Nigeria. In this way, the company can negotiate long term gold off-take contracts with attractive margins as Marc Rich + Co AG pioneered, which was the basis of Glencore.
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First mill in production shortly with more on the cards in 2019
Artisanal miners provide 20% of world gold production. High level discussions with governments in Africa look as though they will pave the way now for a more rapid roll-out of company’s compelling strategy whereby Wishbone effectively becomes a high margin gold producer.
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A conservative multiple of 2020 profits suggests over 500% upside
Our initial target is 0.589p, but discounting forecast gold trading cash flows suggests a higher price of 1.19p. We reconfirm our Conviction buy stance.
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RISK WARNING & DISCLAIMER
Wishbone Gold is a research client of Align Research. Align Research and a Director of Align Research hold an interest in the shares of Wishbone Gold. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Dec | 2017A | 2018E | 2019E | 2020E |
|---|---|---|---|---|
| Revenues ($m) | 8.24 | 8.00 | 34.10 | 78.24 |
| Pre-tax ($m) | (0.91) | (1.04) | 0.39 | 2.43 |
| EPS (cents) | (0.070) | (0.072) | 0.017 | 0.095 |