Why the West African Resources Ltd share price has been going gangbusters

West African Resources Ltd (ASX: WAF) saw its share price rocket up 34% to 43 cents, after the resources company came out of a trading halt following a capital raising, but its share price is also up 90% in the past month and 500% since the start of this year.

Much of that has been driven by the rising gold price – as we discussed earlier today.

The company announced today that it had successfully raised $21 million from existing shareholders and institutional investors – with the funds used to progress its 100% owned Tanlouka Gold Project and repay its existing debt facility.

The proceeds will also be used to fund a Definitive Feasibility Study (DFS) which will go into much greater detail and determine whether the project is commercially viable or not. They are usually required by financiers before they’ll approve funding.

However, West African appears highly confident the project will go ahead – suggesting it will begin early civil works, including construction of a camp facility, ablutions and a water storage facility.

The Tanlouka Gold Project is located in Burkina Faso, West Africa and is believed to be the latest gold discovery in Africa. It is located in a region known for other large gold deposits, but exploration at Tanlouka has only ramped up since 2010 with a number of significant high-grade drill results.

West African Resources drill result

Source: West African Resources Ltd


The DFS is expected to be completed by the fourth quarter (Q4) of this year and West African says it is aiming to have Tanlouka ‘shovel-ready’ by the end of 2016.

However, there are still several critical steps along the way that need completion including financing (expected Q1 2017) and then construction (Q2 2017). The company also expects to receive its mining licence and environmental approvals by the end of this year.

At face value, the Tanlouka project looks highly promising (see picture below) – no wonder West African has seen its share price soar more than 460% so far this year and 80% in the past month.

West African Resources PFS

Source: West African Resources Ltd


But at this stage, an investment is nothing more than speculation given the risks and age of the project’s life (unless you are perhaps a geologist). Plenty of other gold miners have got this far only to stumble at the steps ahead.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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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