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Wishbone Gold Results Irrelevant but 7 key words: BUY

By HotStockRockets | Saturday 1 July 2017

Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Wishbone Gold (WSBN), the precious metals trading and exploration company, announces its final results for the year ended 31 December 2016. The numbers are pretty academic just look for 7 key words in the statement from chairman Richard Poulden.

For what it is worth at the year end Wishbone had cash at hand of $1,065,161 and total admin costs were $944,285. So even if sales activity was to stay at 2016 levels the company could last the year, especially as it now has a debt facility with Sanderson to fund working capital on the Black Sands gold trading business.

Black Sand sales in 2016 were $4.2 million. In the first quarter of 2017 they were $2.5 million so there is clearly a ramp up but that will really kick in when the big Honduras contracts kick in & higher sales will also boost gross margins. Those Honduras contracts have yet to kick in but that brings us to those 7 words.

Richard Poulden's quote is below, the bolding is ours:

"Wishbone Gold plc's further entrenchment into precious metals trading with its subsidiary Black Sand has seen an increase in the profitable opportunities for the Company.

The Company's joint venture agreement in March 2017 through its subsidiary, Wishbone Gold Honduras Ltd with SION Honduras SA funds the development and exploitation of existing gold mine sites in Honduras, enabling then to increase production. In return, the mines will agree to supply Black Sand with all the output from the mines at preferential prices. It's proactive and sustainable model for the Company and its partners, and we look reporting further good news in coming months.


So the next few months will see a dramatic newsflow. Not one mine coming onstream but several and Black Sands really taking off. The maths behind our original tip still stands:

"We believe that Honduras will ensure that 2017 sees a FY profit of not a lot bit that H2 will be materially profitable and that that ramp up will continue into 2018 when the existing pipeline should deliver a pre tax (and post tax since Wishbone is "offshore" ) profit of at least £1 million.

However Poulden is not one to sit on his backside and if other deals of the size of the Honduras are completed you can double or treble those forecasts. We hope, and it is no more than hope, that Poulden will have news of such deals over the summer months.

At 0.65p mid the market cap is £7.4 million. Assuming that Black Sand delivers a profit of more than $1 million which it will do in 2018 there is a defcon of 240 million shares. So the fully diluted market cap is £9 million. That looks far too low given the profits potential from THE EXISTING PIPELINE let alone the upside from additional deals."


We are down on the original tip as the market has misread these results. We will not be for long. At 0.6p to buy the stance remains BUY at up to 0.8p with a 1.3p target to sell as that summer newsflow kicks in.

This article first appeared on HotStockRockets - to catch the next red hot share tip from the HotStockRockets team out shortly as well as two SCORCHERS we tipped yesterday, FRIDAY 30th June, for just £5 click HERE

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