West Vault Mining is the perfect stock for an uncertain gold environment. It has significant cash, a low burn rate, and a fully-permitted, construction ready gold project in Nevada with an after-tax NPV5 of US$200M at $1,500 gold. At a $2500 gold price, the after-tax NPV is more than 10 times the current valuation, totaling $650 million.
We believe it presents a low-risk, high reward opportunity for patient investors.
Tuesday, November 8, 2022
West Vault Mining (WVM.V) : A low risk way to potentially quintuple one's return in a few years!
If you know that gold stocks are cheap but could still become cheaper!If you believe that the price of gold should be much higher in the next couple of years,
then West Vault Mining is the perfect stock to buy now.
Gold stocks have been in a mature bear market
Yes, gold stocks have once more been caught in a devastating bear market. The main gold stock indices are down more than 50% since their highs of August 2020. In plain English, this means that many junior mining equities are down more than 70% from their highs.
The sentiment indicators have all been at historic lows, only experienced before major market bottoms.
A significant weekly reversal in gold stocks
As we mentioned in a recent post, in late September, the GDX (the VanEck gold miners ETF) made a significant weekly reversal touching a low at $21.52 before closing at $ 24.12 on huge volume.
Many major gold equities have already made significant gains from their recent lows. This very significant technical turn around (as well as last week's action, that appears to show a triple-bottom) could very well mark the beginning of a new huge bull market.
Most market participants are still waiting for a bloody tax loss selling period. We all know how treacherous markets are. New bull markets are well known to take off with as few investors on board as possible.
Buy the Dips, but with Indestructible Companies
This bear market in gold equities has already seen four false breakouts. Could this be another flash in the pan?
Yes of course, anything is always possible in speculative markets. If you have cash available, and are not sure about timing, then stocks with minimal downside are companies that can be targeted. These companies must be able to weather a prolonged period of depressed gold prices, but retain excellent rebound potential at a higher gold price. These companies are good buys today.
West Vault Mining owns an outstanding gold project
The Hasbrouck Project is an ideal property for the next phase of the gold bull market.
Best Location: Nevada (near Tonopah, a pro-mining town)
Great Resource: 1.06M ounces of gold of which 927K ounces are in the reliable measured and indicated category
Very Tight Share Structure: less than 60M shares, fully dilluted
US$5M in Cash with a low burn rate of less than $1M CAD per year
The Best Shareholder Base of Junior Mining Company: Sun Valley Gold 46%, Ruffer 17%, Eric Sprott 5%, Konwave AG 4%, Dave Lotan (Non-Executive Chairman of Aurion Resources) 2%.
The new CEO Sandy McVey is a very experienced mining engineer.
And above everything, they have what very few junior gold companies possess: A permit to start construction and produce gold at any time.
A Very Solid Pre-Feasibility Study (PFS)
West Vault's Hasbrouck Project has outstanding economics, even at a low gold price. At $1500 per ounce gold, the after-tax NPV5 is US$200 million with an excellent internal rate of return (IRR) of 65% and an all-in sustaining cost of only $717 per ounce with an average production of 71,000 ounces per year.
But at a $2500 per ounce gold price, the after-tax NPV is more than 10 times the current valuation equaling $650 million. (Hasbrouck's IRR at $1,800 per ounce gold is 92% for an NPV 5 of US$295 million.)
Detractors have mentioned that the PFS is from 2016. However, the Hasbrouck Project has a very low capex of $47M dollars. The construction plan envisions a very simple heap leach operation, benefiting from all oxide geology. Even factoring in cost of inflation, this project will still be highly profitable once it is built.
In the next phase of the bull market, West Vault could go up 5 to 10 times
At its current price of C$.95 cents, the market capitalization is under C$60 million. But at a $2500 gold price, the after-tax NPV is more than 10 times the current valuation, totalling $650 million.
So why is this perfect stock so cheap? Very simple, there should be no news in the foreseeable future.
Simply because West Vault’s Chairman Peter Palmedo who runs the very famous Sun Valley Gold hedge fund wants to maximize shareholder return. He will only support putting Hasbrouck into production once the gold price reaches $2500 an ounce.
Additionally, Mr. Palmedo intends to only build this mine when initial capital expenditure is no more than 20% of West Vault's market capitalization. This is to provide a margin of safety to the project and the company during the construction and commissioning process.
The company itself not only states its stock is extremely undervalued, but WVM has recently bought back 254,500 shares at an average price of C$0.999. CEO Sandy McVey has also purchased more than $80,000 CAD in shares in the open market since January 2021.
For those with the mentality of a typical broker or fund manager looking for a quick fix with high risk, and who are happy to underperform their benchmark, they should not invest in this company.
However, for those that believe (1) a long-term bull market in gold is in place and (2) the yellow metal could reach $2500/oz within the next couple of years (which is less than 50% higher than last week’s closing price), West Vault Mining presents a compelling opportunity for the long-term.With this simple strategy you have a fairly good chance of waking up one day with a huge amount of gold in your vault!
Disclaimer: SGL does not provide investment advice and is not a registered investment advisor. Always do your own due diligence before making an investment. Investing in securities, especially junior miners, can be risky and never invest money you cannot afford to lose. SGL cannot guarantee the accuracy of the information in this post. SGL has attempted to present the information fairly, but it may own shares of West Vault Mining so bias cannot be excluded. SGL has no relationship with West Vault Mining. SGL may buy or sell shares at any time.
SGL makes no representations, and specifically disclaims all warranties, express, implied, or statutory, regarding the accuracy, timeliness, or completeness of any material on this website. You should seek the advice of a securities professional regarding any stock transactions. SGL cannot guarantee in any way that it is providing all of the information that may be available. Please do your own due diligence before buying or selling any security.