Here’s why gold miner West African Resources Ltd shares rocketed 34% today

Today has been yet another day of gains for shareholders of gold exploration company West African Resources Ltd (ASX: WAF). Today the share price rocketed higher by 34% bringing the year-to-date return to almost 500%.

Today’s gain comes following news of a successful $21 million placement of 70 million shares at a price of 30 cents per share.

The funds raised from existing shareholders and leading institutional investors will mean the company can continue to rapidly progress its wholly-owned Tanlouka Gold Project and allow it to fully repay its debt facility with Macquarie Group Ltd (ASX: MQG) ahead of the maturity date.

Furthermore, the placement provides West African Resources with the capacity to accelerate exploration and resource drilling, as well as completion of the definitive feasibility study on its Burkina Faso gold project.

Much like fellow gold producers Resolute Mining Limited (ASX: RSG), St Barbara Ltd (ASX: SBM), and Newcrest Mining Limited (ASX: NCM), West African Resources shares have gone ballistic this year thanks in part to the incredible rise in the gold price.

But unlike those three, it has yet to pull any gold out of the ground this year. Whilst the company undoubtedly has excellent prospects and a strong balance sheet, I would be reluctant to make an investment at this stage. Especially considering the direction in which the price of gold takes from here is quite literally anybody’s guess.

It may however be a good idea to add it to your watch list, as the results of its definitive feasibility study will no doubt make for interesting reading. Until then I would suggest focusing on other areas of the market with more predictable outlooks.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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