I previously posted on WCN in November last year. This update assumes familiarity with that post.

On 1 December 2015 WCN released exceptional results for the Upper Gold Zone at the Aucu gold deposit in the Kyrgyz Republic (pronounced “Kirgiz”, also known as Kyrgyzstan). The best result was 4 metres at 59.9g/t. This was only one of several very high grade results. This project has a very high potential to be a multi-million ounce deposit.

On 23 December 2015 WCN released results for a new, lower, zone at Aucu. Best result at Camp Zone was 9 metres at 6.8g/t. A good result, accompanied by several other potentially economic intersections.

The December Quarterly Report was released on 29 January, 2016. WCN raised $2.7 million during the quarter, but only retained $0.8 million at the end of December. Operating outflow in the December quarter was $1.1 million, including almost $0.4 million in administration.

The company estimates that operating outgoings for the March quarter will be $0.3 million. This seems unrealistic, given that during this period there will be metallurgical test work on Aucu, and drill programs on four Western Australian projects.

On 29 February 2016 WCN released results for drilling at the Ironstone gold prospect. The title was “Drilling Identifies High Grade Gold Mineralisation at Ironstone”. Well, the results were not really high grade, the best was 4.5 metres at 5.5g/t gold.

There are a number of risks with WCN that could adversely affect shareholders, notwithstanding the excellent Aucu results. For example:

  1. The Kyrgyz Republic does not appear popular with gold investors (unreasonably so in my opinion). Another small Australian gold explorer in the republic, Manas Resources (ASX: MSR), is also struggling to gain traction.
  2. WCN is spread very thinly, drilling half a world away at Aucu, and then drilling four Western Australian projects.
  3. The company’s business plan is not clear. For example, what is the objective with Aucu; joint venture, sale, development?
  4. Expenditure control. There is probably less than $0.5 million in the bank. And I suspect that expenditure already committed will consume much of that.

The company will not be able to advance the Aucu project without a substantial capital raising. Any raising could be highly dilutive and put the share price under pressure. Unless they are in luck with the Western Australian projects.

Conclusion

A great gold project in the Kyrgyz Republic with multi-million ounce potential. However, we need a better understanding of the points above. And shape around the next capital raising.

Do watch – but with care. And good luck to WCN with current drill programs.

 

 

My “Worth Watching” series is a brief review of companies that appeal to me. The reviews are not based on in-depth research and are in no way a recommendation to buy or sell shares. The reader is advised to do their own research and/or consult with their broker.

10 March 2016 Companies