West Wits Mining Ltd (ASX:WWI) has received a buy recommendation, a share price target of A$0.054 base case price target and $0.076 optimistic case share price target in Pitt Street Research's initial coverage of the mining company.
West Wits Mining is an Australian exploration and development company targeting gold in two prolific regions, Witwatersrand in South Africa and the Pilbara in Australia.
The company’s South African Witwatersrand Basin Project (WBP) is located in a prolific gold region, known to have produced a significant amount of the world’s gold.
WBP holds a JORC-compliant resource of 4.28 million ounces of gold. A scoping study identified five distinct mine targets for staged development, the first phase of which is the Qala Shallows project.
The following is an edited excerpt of Pitt Street Research’s coverage of West Wits Mining.
Sitting on a golden egg
Benefits of low capital outlay and early production
The company completed its definitive feasibility study (DFS) for Qala Shallows in September 2021 and production is expected to begin by early 2022. Qala Shallows will produce 663,000 ounces over a 17-year life-of-mine (LoM).
The reefs in this area have existing shafts and holes last worked in the early 2000s, when these sites were abruptly mothballed due to decline in gold prices.
WWI will therefore require only clearing and rehabilitation of underground workings before it can begin mining.
This significantly reduces the time and capital required to take the project from development to mining stage, thus making it a highly robust project.
Another factor that contributes to the favourable project economics is that WWI will be processing ore on a toll treatment basis instead of building plants of its own.
On-track to meet project milestones
By mid-2021, WWI had already secured environmental and mining rights approvals and is on track to commence gold production from Qala Shallows by 2022.
The company recently raised about $9 million in new equity and it is working with a debt advisor to secure the relatively modest capital needed to bring WBP’s stage 1 online.
Valuation range of A$0.054–0.076 per share
In its report, Pitt Street Research said: “We have valued WWI at 5.4 cents per share base case and 7.6 cents per share optimistic case using the DCF approach, with conservative assumptions on annual gold production and gold prices.
“We foresee WWI being re-rated once production commences in Qala Shallows. The key risks we see are: 1) commodity price risk; 2) project financing; 3) delays in project timelines/milestones; and 4) unforeseen challenges in processing ore on a toll treatment basis.”