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West African Resources: Burkina Faso's Newest And Highest Margin Gold Producer

Jun. 07, 2020 12:55 PM ETWest African Resources Limited (WFRSF)29 Comments
Taylor Dart profile picture
Taylor Dart


  • West African Resources completed construction of its Sanbrado Gold Mine ahead of schedule and under budget, and is expecting to reach commercial production by the end of Q2.
  • The company will become one of the lowest-cost gold producers in the world based on projected costs at Sanbrado, and the lowest-cost gold producer in Africa by a wide margin.
  • West African's recent acquisition of Toega is quite accretive, completed for $45 million, and this should extend the mine life at Sanbrado with a 25% bump in global gold resources.
  • I believe West African Resources to be one of the 5 most attractive African gold producers, and I believe any 17% plus pullbacks should provide buying opportunities.

It's been a busy year for M&A in the gold (GLD) sector in Africa, with Endeavour Mining (OTCQX:EDVMF) making a run at Centamin Egypt (OTCPK:CELTF) earlier this year before deciding on Semafo Gold (OTCPK:SEMFF), and West African Resources (OTCPK:WFRSF) snapping up B2Gold's (BTG) Toega deposit last month. Both deals were extremely accretive for the suitor, with Endeavour Mining's acquisition of Semafo pushing the company towards becoming a 1 million ounce gold producer, and West African's purchase adding mine life with an extra million ounces of gold resources next door to its new mine.

In this article, we'll focus on West African Resources', which has managed to complete its Sanbrado Mine construction under budget and ahead of schedule. While West African might not seem to stand out much vs. peers with a roughly 250,000-ounce annual production profile, it's the costs that are the meat behind the story, with all-in sustaining costs expected to come in below $600/oz in the first five years. Based on West African's potential for industry-leading margins and a recent acquisition that just beefed up the mine life, I believe West African to be one of the top 3 African gold producers. Therefore, I would view any 17% pullbacks in the stock as buying opportunities.

(Source: Company Presentation)

West African Resources has had a busy start to FY-2020 thus far, with the company announcing that it had completed the build of its Sanbrado Gold Mine $20 million under budget, and an incredible ten weeks ahead of schedule. The company poured its first gold at Sanbrado in mid-March and expects to begin commercial production by the end of this month.

Based on the most recent Feasibility Study, West African expects to produce over 300,000 ounces of gold in its first 12 months of production at all-in sustaining costs [AISC] below $500/oz, translating to

This article was written by

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/db1znYSSubscription 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 (29)

West African Resources will be added to the GDXJ ETF on 19 June (along with Alkane) when the Q2 rebalance takes place.
Truckie Warfie profile picture
I was so sold till that last part. Makes me sick I hope they biu them some hired guns to protect them that's horrible.
Great article, do you have a list of near term production companies with mine either built or almost built. That's like my dream list.
hulubalang profile picture
Another big winner for me. Smart management, monster project, mine built and paid for, great economics, still drilling bonanza intercepts.
Burkina Faso is continually getting attacked and slaughtered by Islamic terrorists. High risk.
Great work, as ever, thanks Taylor,t
Taylor Dart profile picture
Hi Tony,

Thank you & thanks for reading.
Great article Taylor. This is the type of company to buy after some short term political unrest sell off given this is closer to the hot zone in the country. It is certainly a project of the highest technical quality so some more luck with the drill bit will yield more upside. Momentum and news flow expectations certainly favors this company.

The negative:. I think the discount rate the company uses for Burkina Faso( especially in the western region) should be quite a bit higher than 5% in determining is future cash flow valuation as the company has exhibited in its presentation.

Even after its recent rise I think Adriatic Metals ADMLF trades at a much larger discount and has a current stable jurisdiction and has a very high grade silver byproduct. The quality of the project is similar +100% IRR at a higher 8% discount and less than 20% Capex to discounted NPV ratio which is even lower than WFRSF but of course base metals are currently out of favor
Laurentian Research profile picture
@Taylor Dart

Thank you for the excellent article! Let's keep the junior mining coverage at SA going for the readers.
@Laurentian Research
I suggest you and Taylor combine your resources and start an ETF of junior miners from Australia, Africa, Canada, and South America, and other places; US markets are not kind to small caps juniors and the Fed doesn't like gold and silver; in the last ramp up there was such an ETF (included oil and natural gas, gold and silver) that traded in US markets and boy oh boy, did I make money; I don't find the ETF any more
Laurentian Research profile picture
Thank you for the interesting suggestion. I certainly look forward to collaborating with @Taylor Dart in serving the junior mining investors going forward.
Taylor Dart profile picture
Hi Laurentian,

Thanks! Have a great week!
TraderTech profile picture
Too bad this wasn't recommended in the latter part of 2015, or early 2016, at $0.60 or so. Instead, you're buying pretty much at the highs.
Taylor Dart profile picture
I think could be same of most greenfields explorers really, the difference in buying in late 2015 or early 2016 is you're buying a company with almost no cash, no sign that it will ever go into production, and no guarantee it will ever raise capital to keep drilling as at the time, the company's project was nothing special. The companies to buy in 2015/2016 were those already producing, trading at 30% to 40% cash, and with enough cash-flow to weather any storm if the gold bear market did continue, like B2Gold I recommended at $1.00, and Royal Gold which I recommended at $60.

I'm not recommending buying here on West African, merely suggesting that there's probably further upside here to go, so buying sharp pullbacks of 17% to 20% should generate reasonable returns.
One would have been buying at the highs since A$0.43 last summer but it wouldn't have mattered as it continued to rise to its current A$0.90. It's the same (il)logic as applied to Kirkland Lake during its ascent from under C$10 in 2016 to over C$60 in 2019.

I'm not comparing WAF to KL (I hold both), just using it to demonstrate that buying at new highs isn't the wrong thing to do - higher highs are possible :-)
TraderTech profile picture
@Diottica Can't argue with that, but guess I'm just not a momentum trader, just can't buy highs and sell lows.
What currency are you using, i.e. A$.70? Thanks!

Australian Dollars - it's quoted on the ASX.
Taylor Dart profile picture
Hi Move2Troy,

A$ would be ASX. A lot of these Aussie names are very difficult to trade on OTC as there's just not enough volume to provide a market safe to trade in. Some of the bigger names like Newcrest, Silver Lake and Evolution do have at least somewhat tradeable volume though, as long as one carefully minds position size.

Thanks for the reply!
Long on West Africa. Thanks for the article.
Taylor Dart profile picture
Hi Woody,

Happy it was of value, thanks for reading.
Cheers Taylor, nice article. Thanks for bringing this company to my attention
Taylor Dart profile picture
Hi L Stoney,

Thanks for reading, I've been trying to cover some Australian names as well as they don't get any coverage on here, even though most of them are superior operationally to 80% of the US-listed names.
sliman21 profile picture
Lundin Gold is my bet of the three. Long life mine and possible buyout.
Thanks again for all of us, Taylor. Will be keeping an eye on this one.
Taylor Dart profile picture

Thank you for reading, truly flattered the work is of value, even if just to a few.


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