Friday, March 16, 2007

Western Goldfields

Why do you buy the shares of a goldminer? It's because of (1) the resource (2) management, and (3) the price of gold. Western Goldfields (WGI.TO) is a winner on all counts.

* Projected 9.5 years annual production of 165,000 oz. gold
* Starting full production by April 2008
* Cost of sales of $335/oz, all-in costs of $414/oz
* After-tax IRR +25 pct @600 gold; and +35 pct @$700 gold
* Completed resource estimate of 3.61 million oz gold
* Completed feasibility study for mining 2.36 million oz gold reserves.
* Low $286 million market cap capable of expanding by a factor of three after the expected analyst rating upgrades

Western Goldfields will be a solid producer / profit-maker starting in 2008. But there are 142.5 million shares fully-diluted, so traders looking for a 10-bagger are not going to find it here.

I set a 12-month Price Target (PT) of C$4.
Should gold prices move higher, I will not hesitate to set a higher PT.


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