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Wishbone Gold - Update

Wishbone Gold listed on AIM in 2012 as a gold exploration play. 2016 saw the business refocused on gold trading following the acquisition of Black Sand FZE, based in Dubai. This is a location which has quickly emerged as a leading global hub for the precious metals trade. The strategy is to reverse integrate down into the supply chain to gain a guaranteed supply of gold under long term contracts at highly attractive margins.

• Issues behind the share price collapse seem to have been solved

  The past 12 months has seen the share price wilt due to the combined effect of delays at the maiden reverse integration project in Honduras combined with the ramifications of a funding arrangement. With the final completion of the Honduran plant expected by the year-end and the RiverFort finance deal now unwound, it looks as though the clouds have lifted.

• 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 like Honduras and Nigeria. 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 more on the cards in 2019

  Artisanal miners provide 20% of world gold production. High level discussions with governments in Africa look as though they will pave the way now for a more rapid roll-out of company’s compelling strategy whereby Wishbone effectively becomes a high margin gold producer.

• A conservative multiple of 2020 profits suggests over 500% upside

  Our initial target is 0.589p, but discounting forecast gold trading cash flows suggests a higher price of 1.19p. We reconfirm our Conviction buy stance.