Gowest Gold (OTC:GWSAF) (TSXV: GWA) just announced that it has completed a C$2.9 million private placement with its largest shareholder--Fortune Future Holdings. After the secondary that company holds 85 million shares, or a third of the company. The money will primarily be used to finance a pre-feasibility study at the company's flagship Bradshaw Project.
Despite this dilution (there were only 176 million shares outstanding before this 36 million issuance), and despite the weak gold market shares of Gowest Gold have held up remarkably well. As I pointed out in July the company is, on the one hand, like many of its peers in that it has a highly economical project with an initial capital need that far exceeds its means or its market valuation; but on the other hand it has several qualities that separate it from its peers such as its project's location--the Timmins Gold Camp--and the fact that it has the opportunity to use a mill owned by Kidd Operations rather than constructing its own mill. I argued that this gave it an edge in the financing markets, and that the shares were substantially undervalued.
We are seeing this play out as the company is not only able to raise money so that it can move forward with its pre-feasibility study, but its share price hasn't fallen with the rest of the sector or with the gold price. Granted, this is an illiquid stock and it has a valuation of <$20 million, (meaning it doesn't take a lot of capital to keep the share price afloat), but I think it is evident that investors want to own shares in a winner such as Gowest, and when the gold price turns around I believe that it will be one.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.