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Wallbridge Mining: Valuation Becoming A Headwind Again

Taylor Dart profile picture
Taylor Dart


  • Wallbridge Mining is one of the top-performing gold stocks for May, up 94% in just over 20 trading days.
  • The company continues to delineate a massive gold system at its Fenelon project, with the potential to prove up over 3.5 million ounces of gold by Q4 2021.
  • However, at a market capitalization of over C$1 billion, the stock is once again getting expensive, even if Wallbridge proves up 3.5 million ounces in its maiden resource estimate.
  • Based on valuation becoming a headwind yet again, I believe investors would be wise not to chase the stock at current levels.

It's been a rollercoaster ride for investors in the junior mining sector (GDXJ) in 2020, as we've seen a nearly unprecedented event with several names seeing more than half their value erased in mid-March, only to claw back all of their lost ground in just 60 trading days. This is precisely what we've seen from 2019's sector leader, Wallbridge Mining (OTCQX:WLBMF), as the stock lost more than 60% of its value from its Q4 highs to its Q1 lows but has come racing back to close at new highs with a head of steam last week. While the company continues to add significant value for shareholders and looks like it's sitting on a world-class deposit in Quebec, the stock is now trading at a valuation reserved for producers as an explorer at a market capitalization above C$1 billion. Based on this valuation headwind, the reward-to-risk has shifted back to unfavorable, and I do not believe investors would be wise to chase the stock above C$1.35.

(Source: Company Presentation)

Just over six months ago, I wrote on Wallbridge Mining and discussed that the reward-to-risk had shifted significantly for investors, with a plethora of insider selling showing up near a critical resistance level. The stock promptly fell over 25%, placing investors that had chased the stock underwater, but the mid-March COVID-19 Crash brought with it a tsunami of selling pressure, leaving Wallbridge more than 65% off its highs at its March 16th low. Those that managed to pick up the stock below US$0.45 did an excellent job, as this is where I noted the valuation would get attractive again. Many investors will argue that the stock is higher than where I wrote my December article, and therefore, they may believe my call to take profits was wrong. While it's true that the stock is higher than the December article, one had to sit through a

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Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough You can access more in-depth research, my current portfolios, my top-12 miner rankings, GDX buy/sell signals, new positions I am entering/exiting, plus proprietary sentiment indicators updated weekly for gold miners in my newsletter below. Returns Link: https://imgur.com/a/sreY6SzSubscription LinksMonthly: https://buy.stripe.com/7sI14d4b92vFdUc15cAnnual: https://buy.stripe.com/4gw28h0YXeen7vObJP - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I am/we are long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (37)

Taylor, it would be nice to have an update on Walbridge… there have been some recent developments that are of note. Thanks for this detailed and rational analysis…
What is your view of WM today?

Total combined Indicated Resource of 2.67 million ounces: 43.56 Mt grading 1.91 g/t Au.
Total combined Inferred Resource of 1.72 million ounces: 31.78 Mt grading 1.69 g/t Au.

Rust Belt Investments profile picture
Thoughts on the valuation now, @Taylor Dart?
Taylor Dart profile picture
Very reasonable, key will be the resource estimate though. They are going to need to prove up at least 3.2 million ounces at above 2.70 grams per tonne gold to impress the market in my view.
Rust Belt Investments profile picture
@Taylor Dart Appreciate your thoughts as always, sir!
adriano321 profile picture

Taylor - love to get an update on Wallbridge now that' its down almost half from the highs.

Taylor Dart profile picture

Hi Adriano,

Valuation improving, but RE is a big wild card and hard to model due to multiple zones, so a lot will depend on where the number comes in & grades. I think there’s 4-5 names with better valuations currently among juniors currently, the standout would be Sabina, valued $200 M above WM but with 9 million ounces. Among lower caps, I see much better value elsewhere also. Valuation decent tho, but on relative basis I like others more.
Nice write up. WM mgt is much more focused than was BAR and WM may quickly pin down the gold content in the area around the 807 g/t hole found by Balmoral. If there are a number of equal finds near that 807g/t hole, the share price will jump. I expect WM will double the depth at Matineire quite quickly. and if that proves more healthy at depth, we may also see a share price jump. Drill results to date has the world watching so more impressive finds will turn observers into buyers. Buying more here may prove very healthy.
How do you reconcile the fact that the examples you gave of tier 1 buyouts from the past were done in a time when price of gold was much lower (most of your examples were from 2015 and 2016, where price of gold was closer to $1200/oz). Only exception is detour, and even then, when compared to that, the price of gold is already $200 higher and moving up.

By the time WM gets its resource estimate, price of gold could be well north of $2000, and would very much justify a higher valuation metric
Taylor Dart profile picture
Hi Raysiu,

Despite the fact that gold price is 20% higher than when average acquisition was done over past 5 years, the price paid per ounce for explorers has not moved higher, and has actually dropped from $76/oz to $71/oz. Therefore, the gold price is not a factor in what price suitors are willing to pay for ounces. Already, I believe it's generous for me to group Wallbridge in with producers when the company is a pre-resource explorer. The fact that it's worth more than producers as a pre-resource explorer suggests that the valuation is quite unattractive above $1.30 CAD.
PM's Rock profile picture
Thanks for the excellent article Taylor. I have made some nice profits, taking some off the board when you said to. Your analysis of names always makes me much more confident when I trade. Keep up the good work. Taking profits on a portion of your trade is never a bad thing. I find your articles are top shelf and much more in depth than some of the other metals commentators.
Taylor Dart profile picture
Hi PM's Rock,

Thanks so much for the kind words. Couldn't agree more, as one of the greats used to say "When the time comes to sell, you won't want to". While I don't think there's any need to sell out full positions, it's never a bad idea to book a little profits or at least take one's foot off the gas when everyone else is screaming from the rooftops about how great a stock is, and the majority of retail are already in, and overweight.
Maybe or maybe not...

The question isn’t should you sell your shares given its valuation. The real question is if you do sell, where would you get back in and when?

The stock may have a pullback after this run, or it may not. If you sell and more great drill results are announced you’ll be buying the stock at much higher levels hoping for more. Given their results so far, that may be very foolish to do.

In my 30 years experience in investing you never sell a stock in a bull market, in an uptrend, in a great underlying environment for its main product, due to valuation.

True investing is about making big money in a handful of stocks because no one is right even 25% of the time. Hold your winners and let your losers go.

All signs are currently pointing to Wallbridge Mining as one of those winners.
gohabsgo70 profile picture
Most are in at these levels hoping for a Kirkland Lake buyout. Thats the potential exit strategy for Sprott.
As a recent KL shareholder, I would vote NO and/or exit my KL position immediately if this were done.
Well written Taylor and we agree once again. I would not be buying these shares.
My only junior is a small position in Genesis Mining bought recently at .30 CAD. Its a longshot lotto ticket ( I never buy these )
Taylor Dart profile picture

Couldn't agree more. Exploration upside or not, if they make a second buy after waiting for a stock to double, the market will not like one bit, nor should shareholders - that's why I don't think they do it, especially with a weak share count vs. WM's strong one. It was at least a slightly diff story with DGC strong, but KL stronger in that acquisition.

Long-term, it's certainly a possibility that WM gets acquired, but I don't see it in next 12 months, unless it's by a different company.
Taylor Dart profile picture
Oops, weak share price***, Im sure you knew what I meant.
adriano321 profile picture
This is a speculative play, but the jurisdiction and exploration potential make this an incredibly interesting opportunity in light of the times as we enter the next leg of the gold bull market. I agree that exit strategy is important, but I'm going to let this run a bit longer or until the global meta-narrative starts to change. For now, I have no reason to think the monetary madness ends anytime soon.
Chancer profile picture
@ Taylor Dart:

I will own only a small position in Wallbridge at US$.607 (about Cdn$.80) via the Balmoral conversion. And I will use caution re. adding as you have warned.

Thanks for article.
Taylor Dart profile picture
Hi Chancer,

Happy it was of value!
I had a feeling you were writing another WLBMF article considering the recent action in the stock, and you did not disappoint. I sold about half my shares during the last peak after your recommendation to sell. I then bought back all my shares of WLBMF during the Covid-19 PM price collapse panic, and also added to my KL, OBNNF, and GLGDF. So last week I was asking myself, "What would Taylor do with these WLBMF shares after they have went up so much again?" I hit the button and sold ALL of them this time. I did not get out this time at the very peak, but I have made good money twice now on this. Maybe I will get another chance to own it again, but I took the profits while I had them. Thank you again for all the articles and research you provide on here, as it has really helped my research in the sector that I love so much. How do you feel today on Osisko Mining vs Wallbridge valuations comparing the market caps of each with the amount of likely resource for each ? Which would you rather own at today's price ? Thanks Taylor !
Osisko Mining vs Wallbridge is a good question. I'd also appreciate to get an answer.
Taylor Dart profile picture
Hi Fred,

Haha, WWTD. Sounds like you've done some exceptional trading on this one, nicely done. That's what so many don't seem to understand when they say that you can't trade around a position, if you can ride the stock twice for similar gains, it's like you're selling it at $1.20 US with compounding, so trading is the better way to do it, as long as one is decent at trading.

That's a tough one, I don't love either at current valuations, but given the choice between OSK @ $3.95 CAD and WM @ $1.35 CAD, I would take OSK. But I see much better opportunities in the junior sector currently outside of those 2, the valuations on both don't leave a ton of upside currently unless we're heading to new all-time highs in next 9 months on gold.
"If" is a big word. It's all perfectly clear in hindsight. No one should pick their gold mining fruit until it's fully ripened. "Traders" never make any real money
I'm short this stock from 1.00, so I desperately need it to drop.
Thanks for your well written article on Wallbridge Mining, which is the second biggest winner, after KL, in my portfolio. I bought most of my position in Feb 2019 at 16 cents on the recommendation of that philanthopist Eric Sprott after he mentioned the company for the first time on his weekly podcast. I havent sold a share, yet. I think you are missing the big picture with Wallbridge. Fenelon is a tier 1 gold deposit with both large open pit and high grade underground potential. Also Balmoral intercepted high grade gold on their property along the strike from Fenelon which suggest how truly large the Fenelon deposit is. Between Fenelon and Detour is Martinere which has 600k oz gold open pit resource and lots of blue sky for resource expansion. WM is takeover target for likely either AEM or KL and these majors are going to pay up to get it because they got to replace declining gold reserves and tier 1 gold deposit in safe friendly jurisdiction is rare. Also Taylor you didnt mention in your well written piece the value of WM Sudbury PGM assets and that WM is the operator in the JV with Sibanye Stillwater.
Taylor Dart profile picture
Hi Peter,

Thank you. I don't think I'm missing the big picture at all, I clearly stated in the article that this a monster deposit that's capable of proving up north of 4 million ounces of gold in the next 2 years. In my view, I would argue that you're missing the valuation picture, which is that the company is worth $200/oz almost as a explorer, while producers are typically bought out for $150/oz. Therefore, while an argument can be made that AEM or KL could pay up to take over Wallbridge, they would get killed for doing so at these prices without a defined resource. It's very rare for pre-resource projects to be bought out, and if they are, majors are rarely throwing C$1 billion at them. Anything is possible here, but when you can buy emerging producers for $100/oz, whether the emerging producers deposit is inferior or not, it's hard to justify paying $200/oz for explorers. Everything has a price.

This reminds me of Osisko in 2017. Massive discovery, clearly a 5 million ounce resource, but all the juice squeezed out short-term with a C$1 billion market cap. We saw a significant fall from grace since. Yes, Osisko has more capex, yes, it wasn't as friendly a market, but C$1 billion valuation is reserved for producers, and Osisko is much higher-grade than Wallbridge, just look at some of their drill results:

2 M @ 2200~ G/T
6.4 M @ 558 G/T
7.8 M @ 416 G/T
5.2 M @ 510 G/T
5.9 M @ 416 G/T
13 M @ 106 G/T
25 M @ 44 G/T

Therefore, while Wallbridge could command this valuation in 18 months if in production, it's hard to justify here. Nothing goes up in a straight line.
Did you see WM got added to the MSCI Canada Small Cap Index on Friday?
Lots of volume late in the day because of that.
Taylor Dart profile picture
Hi Dhouser,

Yes, it's been my experience that funds are always late, and this often marks short-term tops for stocks. By the time the funds finally wake up and want to add a stock to an index, they're chasing its performance, are buying with abandon. A good example was Canopy Growth being added to the TSX near its peak.
I think all people should have the right to be able to express their opinion...as long as its not vulgur nor raccist nor slander without it being taken down from the board in a form of preselective censorship from either the author or monitors...what..only posts of "taylor you do a great job"...allowed here?
Taylor Dart profile picture
Hi Rasputin,

I, nor any contributor has has the ability to delete posts, moderators do. If they find that posts don't add value to discussion, they typically delete them.


Thanks for this detailed analysis Taylor. Always appreciate your insights! Definitely agreed with you that while Wallbridge has a big potential, the risk v rewards of buying this now is definitely not skewed in the buyers favour. I hold shares in Ely so I have exposure to Wallbridge through that. Definitely prefer other names, such as Pure Gold Mining, for now, though if Wallbridge were to drop 50% in the next three months I will pick it up in a heartbeat!
Taylor Dart profile picture
Hi Fr72,

Flattered to hear the article was of value & thanks for reading. Sounds like you've got a few solid winners thus far, great trading!
Many thanks! As always, you have winners, and you have some losers, but so far the winners have thankfully outperformed the losers. Looking forward to seeing more updates from you!
Also to consider Calibre Mining, GoGold or Integra. More value for money albait Wallbridge is a great company with an excellent management.
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