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The best small cap miner to buy on the JSE right now - it could return 125% in the next year!

by , 08 August 2014

“What's the best share to buy on the JSE today Francois?”

I get this question a lot… And to tell you the truth the answer changes all the time. Markets aren't static and share prices move - changing what's a good buy all the time.

But if there's a small cap miner that excites me RIGHT NOW, it's the one I'm about to share with you today!

A hot junior miner you need to own right now
  • 2012 Earnings per share increased to 11.4cps from -8.4cps
  • 2013 Earnings per share increased to 12.2cps
  • 2014 Earnings per share increased to 15.7cps
That’s a short ‘resume’ of Wescoal’s profits for the past three years…

It shows increasing stability in profits, and consistent growth.

But the company is about to experience an unprecedented surge in earnings!

And that’s the reason why I really like this share.

Why Wescoal’s set for major earnings growth

Wescoal is constructing a new mine called Elandspruit. This mine should produce its first coal in January 2015 and should reach full production a year after that.

The potential this mine adds to Wescoal’s bottom line is immense!

You see, the Elandspruit coalmine is a super low cost mine. Its production costs will come in at nearly half that of many large mines operated by Billiton, Anglo American, or Glencore…

We’re talking 30cps earnings or more.

On a PE of 12.5 that puts Wescoal on a target price of around 375c. From its current 166c that’s a 125% return on your money.

The one question holding back Wescoal has been answered

The one thing that’s been holding back the share price of this miner has been the fact that between now and the time that its Elandspruit mine runs at full capacity Wescoal’s remaining mine, Intibane, will run out of coal.

So that leaves a bit of an earnings ‘dead spot’.

But Wescoal has solved this problem.

You see, the coal it mines on Intibane extends on to the land adjacent to Intibane. And the company has signed an agreement with the owners of this land to buy it and their mining right in order to continue mining there once Intibane runs out of coal.

This means Intibane will continue running until 2017.

And this as well adds massive upside potential to Wescoal.

Then, on top of this you can also throw in Wescoal’s recent acquisition of Mc Phail coal trading to the mix.

This acquisition will deliver big returns this year.

Firstly it saves Wescoal around R10 million a year just in terms of synergies with Wescoal’s existing trading company called Chandler coal.

But more importantly this trading business also adds profit to Wescoal’s bottom line – you see, it literally doubles Wescoal’s coal trading revenue overnight!

The best of all? This small cap miner pays a dividend

If there’s one thing that Wescoal’s proven in the past three years is that it can convert profits – which are numbers on paper to ACTUAL money.

This is where most miners falter. They show paper profits year after year after year. But they never return any of that to shareholders in the form of dividends. Wescoal does just the opposite.

In fact, in 2013 it paid a 3c dividend and this year it increased its dividend 26% to 3.8c.

And as the company completes developing its Elandspruit mine it’ll have loads of spare cash on hand to share with shareholders. So expect that dividend figure to grow.

If you’ve never heard of the company, or just dismissed it on the premise of it being a small cap miner, don’t.

Heed my word – this small company is going places. To find out more about opportunities like this one check out my Resource and Scarcity report.

Here’s to unleashing real value

Francois Joubert
Editor, Resource and Scarcity Report

The best small cap miner to buy on the JSE right now - it could return 125% in the next year!
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