Yeah, I'm pretty agitated by what's been going ... I detest seeing shareholder capital disrespected in this way, especially with the ongoing dilutions without real justifications or transparency. But the problem is the underlying assets are class.
The $2.70 spike high was, I think, as a result of ETF re-weighting. When WGX listed they built inherent scarcity into the shares by issuing like 304.5m shares but importantly the floating stock supply was a lot lot lower. This lack of liquidity ended up reflecting unusual share price spike high's and spike low's when the ETF needed to increase or decrease their portfolio weighting. This is mainly the reason attributed even by PC to the $2.70 high and the $1.45 low (and don't forget to include the shorters).
The management issue I allude too is not so much an issue for the retail investor who can hold the stock long and not really worry about the day to day stuff as long as things don't go stupendously wrong because most retail don't look at their capital the way institutional and/or sophisticated investors do. Institutional and/or Sophisticated investors look at their capital through the lens of VaR and ROIC (some of the many measurements). There is a reliance on forward guidance/targets to determine a financial future state and pricing of a company which will allow a determinant of a target return on invested capital. If they don't have confidence in management executing their strategy because guidance is never met, then WGX won't enjoy the "exorbitant privilege" (sorry, always wanted to quote de Gaulle) that the community has given some of the others like EVN, NST, SBM, RRL, SAR ... And when you have options to deploy your capital in gold stocks why take the risk to jeopardise your funds performance.
My thinking has been that WGX was ripe to be a take over target. The only one the table with the management class, free cash, balance sheet, share price and price earnings to do it is Northern Star. Considering their Management is considered by the broker analysts as the best in the business, you would think they could turn WGX around and get production to meet guidance consistently. And they could target the costs aggressively as they did with their own mines. NST's addage is "we are a business first" whereas WGX's last presentation said it perfectly, "we are miners". They could do it as a 3 to 1 deal valuing the around 2.05 a share which is about 20% premium. And more imprtantly, NST are due for a take over you would think. I think they have 9 years left on their reserves and sitting on around $400m in cash. Either they have found a way to considerably extend those mine lives and then shareholders will want a capital return or they are going to have to invest in something and there's nothing cheap out there except ....
At these prices, you would have to think the WGX board would have had to been approached for takeover by now.
But look on the bright side, if this quarterly is a bumper one, reflects that the annual guidance will hold and importantly costs are coming in the lower bound of $1,220 then the lack of liquidity and 9.5million shares sold short could mean we could get a good spike.
WGX Price at posting:
$1.67 Sentiment: Hold Disclosure: Held
(20min delay)
