MINING MARKETS & INVESTMENT NEWS — INVESTMENT COMMENTARY — Analysts recommend Wheaton River for ‘risk-tolerant’

It wasn’t a light at the end of tunnel after all — only an English banker stumbling around with a flashlight, checking out how much gold he had left to sell in his bargain basement.

Notwithstanding the grim reaper in a bowler hat, mining analysts are finding bargains of their own in the beleaguered gold mining sector. Among the latest to get the nod is Wheaton River Minerals (WRM-T), a Toronto-based junior operating a seasonal heap-leach operation in northern British Columbia and developing a second gold operation in sunny Costa Rica.

Analysts Joe Hamilton and Murray John of Dundee Securities recently rated Wheaton River “a buy for risk-tolerant investors,” setting a 12-month target of 55 cents a share. The debt-free company currently trades at 30 cents, in a 52-week range of 22-50 cents, and has 40.7 million shares outstanding.

The seasonal mine, Golden Bear, is expected to produce about 160,000 oz. gold over the next three years at an average cash cost of US$175 per oz. Barring an exploration discovery that could extend the mine, it is scheduled to close in three years.

At the Bellavista project in Costa Rica, a proposed mine is expected to churn out a total of 435,000 oz. gold over 7.3 years at an average life-of-mine cash cost of US$175 per oz. Capital costs are estimated at US$28 million.

In a recent research report, the analysts point out that Wheaton River’s control position in Kit Resources (KIT-T) gives it exposure to a large exploration project in the new northern Canadian territory of Nunavut.

George Lake has an indicated gold resource, outlined by 900 holes, of 4.24 million tonnes grading 9.8 grams gold per tonne, roughly equal to 1.34 million contained ounces. The project has additional inferred resources of 2.2 million tonnes grading 9.69 grams.

Wheaton River owns 23% of Kit, which has already carried out a prefeasibility study for George Lake. For capital costs of US$120 million, a 2,000-tonne-per-day operation is targeted to produce about 190,000 oz. gold annually at a cash cost of US$200 per oz. The analysts caution, however, “that a spot gold price of US$350 per oz. would be required for a production decision to be made on the basis of this prefeasibility.”

If George Lake represents “future value,” the analysts believe Bellavista represents “significant unrealized value” in Wheaton River shares. Situated 75 km from San Jose, Bellavista contains a minable reserve of 11.2 million tonnes grading 1.54 grams gold per tonne, or 554,000 contained ounces.

The proposed open-pit, heap-leach mine is expected to turn out 60,000 oz. gold annually, with a payback period of 3.8 years at US$325 per oz. gold. This estimate is based on a revised mine plan, which is believed to be less aggressive and more environmentally acceptable than one envisioned by a previous operator.

Despite the challenges of permitting mines in Costa Rica, the analysts believe Bellavista has a good chance of approval. A new environmental impact statement is being prepared by Wheaton River. “We believe that the project will require at least 12 months to fully permit and to arrange financing,” they state. “Consequently, production could commence in mid-2001 to early 2002, replacing the loss of production from Golden Bear.”

On the management front, the Dundee analysts cite the company’s “highly developed entrepreneurial spirit,” as well as its “full-time, seasoned professional operations, financial and exploration personnel.”

At the end of 1998, Wheaton River had cash and bullion of $7.2 million, which includes a $2.9-million provision for reclamation at Golden Bear.