Investment Comment Aussie assets make Whim Creek a buy

In a bid to turn Whim Creek Consolidated (TSE) into an international mining concern, Peter McAleer spends much of his time on board aeroplanes which take him to properties in Australia, the United States, Chile and Great Britain.

During his travels, the Whim Creek chief executive crosses so many time zones that company executives say his body should be donated to science. But if McAleer logs more miles on behalf of his company than your average jumbo jet, his efforts appear to be paying off.

By acquiring a 47% interest in Westfield Minerals and amalgamating with affiliate Austwhim Resources of Australia, Whim Creek will increase its gold production to 215,000 oz next year.

The company was also added to the recommended list of Shearson Lehman Hutton Securities. In Shearson’s July 27 Mining Weekly, analyst Oliver Messenger describes Whim Creek as an innovator in the Australian mining scene with a management team prepared to try techniques foreign to conventional mining.

“Whim Creek has no debt, strong cash flow and exposure to increased gold production over the next two years,” said Messenger. After producing a record 24,590 oz gold during the second quarter, compared with 10,182 oz at the same time last year, Whim Creek reported a first half operating profit of $7.02 million(A) or 10 cents per share. That compares to $2.9 million or 5 cents per share at the same time last year. Cash position

On June 30, the company had increased its cash position to $15.8 million from $4.5 million at the same time last year. At press time, the Australian do llar was being exchanged for $1.01(C).

Most of Whim Creek’s increased gold output will come from eight Australian gold mines. The largest of those is the Paddy’s Flat operation where a recently commissioned treatment plant will boost production to 71,000 oz in 1989 from 42,000 oz this year.

Whim Creek operates the Haveluck gold mine in the Meekatharra area of Western Australia where a plant upgrading program will increase production next year by about 6,000 oz from 45,000 oz expected this year. With 2,000 oz coming from the Labourchere heap leach operation (also in western Australia), production from the three mines will total 101,000 oz rising to 175,000 oz in 1989, Messenger said.

In an effort to consolidate its holdings, Whim Creek recently acquired over six million shares and options of Westfield Minerals from affiliate Northgate Exploration (TSE). Chilean deposit

The investment gives Whim Creek a larger stake in a Chilean silver deposit in which Westfield holds a 35% interest and a small gold producer in Nevada’s Little Bald Mountain region. As reported (N.M., May 23/88), the Chilean mine is scheduled to produce more than 350,000 oz gold and five million oz silver by heap leaching over the next six years. Partners in the venture are Shell (42%) and Citibank N.A. (23%).

While equipment problems have caused delays at the Little Bald Mountain mine, leaching operations resumed in mid-April and by the end of the recent second quarter had produced 2,775 oz gold.

Westfield is also earning a 70% interest in a copper-zinc massive sulphide discovery near Flin Flon, Man. Called the Big Island Lake property, it is the subject of a summer drill program designed to expand known mineralization and locate other mineralized areas.

As part of the corporate restructuring program, Whim Creek has made an offer to acquire all of the fully paid shares to which it is not currently entitled in its 38%-owned Australian affiliate Austwhim Resources N.L. Issued capital

Under the terms of the offer, the transaction would be completed on the basis of two Whim Creek shares for every seven Austwhim shares not currently owned by the former company. “Following the Austwhim takeover, it is expected that Whim Creek’s issued capital will increase to 87 million shares,” said Messenger. Whim Creek shares were trading recently on the Toronto Stock Exchange at $2.55 in a 52- week range of $5.88 and $1.95.

While the Shearson report makes no earnings predictions, following a trip to Whim Creek’s Australian operations it is optimistic about the company’s future.

“All in all, Whim Creek is on a strong growth curve, with forward looking management, expanding the company on a number of fronts,” the report says.