<<I'm definitely interested in what you have to say about WTC>>
OK... the reasons I think it could still be a 10-bagger (over the next couple of years)....
1. I think that the resource they currently have at Penasquito could more than double, given that the Chile Colorado deposit is still open in 2 directions and at depth, and that they have 3 or 4 other highly prospective zones shaping up.
(i.e. Multiply market cap by 2!)
2. The project economics in the recent scoping study are pretty good, even at current metals prices (25%+ IRR). I think they'll improve significantly:
- as the overall resource grows
- as they convert some of the current inferred resource to indicated
- when they start including the near surface oxide material in the resource calc (rather than as waste)
- and especially if they prove up a low cost, near surface oxide deposit at the new Penasco West target.
(Add 20% say)
3. After more detailed testing, the specific gravity is likely to be a lot higher than the 2.6 assumed in the current resource estimates.
(Add 10%)
4. If prices of precious and base metals continue to rise, Teck may start active work again on the San Nicolas deposit and the valuation of that should rise significantly (21% owned by WTC). IMO this is not reflected in the WTC price.
(Add 10%)
5. The current valuation of WTC per oz of silver in the ground is way below that of other companies with equivalent world class deposits (see the Proteus Capital report). They estimate WTC at $0.22 per oz, compared to values ranging from $0.52 to $1.10 for Silver Standard, Apex, Pan American and Coeur d'Alene. While Proteus is paid by WTC, their report is of high quality and I don't see anything exaggerated in their estimates. While Penasquito is at an earlier stage than the properties of these companies, the differential in valuation should reduce as WTC's exploration work continues. The increase in valuation due to this alone could range from 2.6 to 5.5 times!
(Multiply by 2... to be conservative :^)
The product of these multiples is: 2.0 x 1.2 x 1.1 x 1.1 x 2.0 = 5.8
Finally, if the POS goes up to $7.00 say in the next 2 years (a minimum target as far as I'm concerned), the IRR would increase dramatically, as would the valuation.
(Multiply by 2 again)
So, 2 x 5.8 = 11.6
i.e. I'm assuming an 11.6 bagger from here! <vbg>
Seriously, I do think we could see WTC as a $50 stock a few years from now -- maybe even sooner. These calculations may be "back of the envelope", but they're not totally out to lunch IMHO. As I've mentioned, WTC is my largest holding, so I have a strong vested interest in seeing something like this happen. But everyone must do their own DD and this is purely my opinion and not a recommendation to buy. Any junior mining company involves high risk, and if silver goes back down to $4, WTC will probably go back to sleep!
Regards,
Howy |
