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Wishbone Gold - Initiation of Coverage. Conviction Buy

Unique gold play providing artisanal miners with processing equipment to gain attractive gold off-take agreements Wishbone Gold joined AIM in July 2012 as a gold exploration vehicle. The 2015/16 recession in the resources sector led the management to sensibly mastermind the acquisition of the gold trading business Black Sand in 2016, seeking to grow cash flow/profits via a different gold strategy.

Rapid growth in gold trading using the Marc Rich/Glencore model

Wishbone is financing equipment to dramatically improve gold production for artisanal miners in countries in Central America and Africa: the model is first being implemented in Honduras. In this way, the company can negotiate long term gold off-take contracts with attractive margins as Marc Rich + Co AG pioneered, which was the basis of Glencore.

First mill in production shortly with three more to follow in 2018

Artisanal miners provide 20% of world gold production. In Honduras, Wishbone has a pipeline of 4 projects and is teaming up with its US mining equipment supplier, Scotia International and the Honduran government. Rapid growth is expected by rolling out this strategy in S. America & Africa.

Proven management led by Sirius Minerals’ ex-CEO/Chairman

Aligning interest with shareholders, Wishbone management own the majority of the shares. CEO/Chairman Richard Poulden held the same roles at Sirius Minerals where he oversaw its transformation into a substantial potash company, with the share price rising from under 2p to 40p.

DCF analysis suggests upside of over 180%

Investors have enjoyed a near 200% increase in the share price in the last 18 months. Discounting forecast cash flows of the gold trading arm and using a peer comparison of the gold exploration projects gives a target price of 1.97p. With the shares currently trading at 0.70p we see material upside & initiate coverage of Wishbone Gold with a Conviction buy stance.