Why Wesdome Gold Mines Stock Can Go Higher

Wesdome Gold Mines [stock_market_widget type="inline" template="generic" color="default" assets="WDO.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is having a forgettable 2019 as the stock has underperformed the market so far this year. But the stock has had a shot in the arm of late after the company released its 2019 fiscal first-quarter results.

Let’s see what investors liked about the company’s latest quarterly performance and if Wesdome Gold stock can go on a rally from here.

Impressive Growth in Grades Driving Results

Wesdome Gold delivered first-quarter production of 19,000 ounces, an increase of 6% from the prior-year period’s production. The increase in the company’s production was driven by higher grades at the Eagle River Mine.

Wesdome witnessed a head grade of 18.5 grams per ton (g/t) during the quarter, up from the prior-year period’s head grade of 12.0 g/t. The increase in grades helped Wesdome boost its production at a lower cost base. More specifically, Wesdome’s cash cost per ounce of gold sold fell to $651 from $790 in the year-ago period, an annual decrease of 13%.

Its all-in sustaining costs dropped to $986 per ounce from $1,061 an ounce a year ago, a small decline of 2%. What’s more, Wesdome witnessed an average realized gold price of C$1,733 an ounce during the first quarter of 2019, which was up from the year-ago period’s pricing of C$1,698 an ounce.

Thanks to the higher average price and an increase in production, Wesdome’s revenue increased 24% year over year to $32.5 million. The company’s net income came in at $8.1 million, or $0.06 per share. This was a major improvement over the year-ago period’s net income of $2.9 million, or $0.02 per share.

In all, Wesdome delivered an impressive performance during the quarter as all of the company’s key metrics improved substantially. But more importantly, investors can expect the company to sustain its momentum in subsequent quarters.

A Bright Future Ahead

Wesdome Gold has been able to outperform its own expectations. The company’s first-quarter grade profile was better than its original estimate of 15.5-16.5 grams per ton. The better-than-expected grades were a result of Wesdome getting access to richer ore at one of its drill sites.

As it stands, Wesdome will continue drilling in the high-grade areas going forward, which should potentially boost its resource profile. According to the company’s press release:

Ongoing development on 1,038 metre level (“m-level”) has now extended 7 Zone over 146 m in strike length and grading 30.5 g/t Au over an average true thickness of 2.61 m and recent drilling has now confirmed that this longer strike length extends to depth over an addition 100 m to the 1,250 m-level and remains open down dip.

As a result, don’t be surprised to see an uptick in Wesdome’s gold grades in the future quarters. This would eventually result in an increase in production and also lower costs, allowing the company to boost both its top and bottom lines.

Not surprisingly, analysts expect Wesdome’s earnings to double year over year in 2019 to $0.22 per share, while next year, its earnings are expected to increase to $0.34 per share. So, don’t be surprised to see an uptick in the company’s financial performance and stock price in the future.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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