Great Western Mining (GWMO) RNS M2 ST Update

8 August 2018

Disclosure: I hold 8.80% of the shares in Great Western Mining (GWMO) as at 26th July 2018

Today Great Western Mining released the initial assays from the highly anticipated M2 ST drill. Shareholders have been waiting on these assays for several months and we have seen several positive RNS updates from the company since the placing in early July which was criticised by some including myself.

The short summary of the RNS is that the initial assays contain nothing of any value, but I think investors need to understand the M2 ST target along with the other drilling targets to make an informed decision.

M2 ST

It was already known that GWMO had not reached the expected mineralised diorite at M2 ST but we had been told that the company had discovered an “intense hydrothermal alteration and mineralisation at the projected base of the M2-Sharktooth Dunlap caprock”. Investors like me had put 2 and 2 together and come up with 5 as now we understand that this geological formation was nothing significant in terms of minerlisation. In fact it has been an extremely challenging zone to try and drill through in order to reach the expected zone.

We have today had the update that GWMO will now abandon this hole and move 183 metres West where they expect to be able to reach the mineralised diorite at a shallower 360 metres. My estimate on this new hole is around 1 month to 1.5 months to reach target depth and then around 1 month from there to obtain assays. I would hope that once hit the company will update us through RNS to explain that the second of the planned 5 holes has hit something significant.

My view of M2 ST is that nothing has changed in terms of the geological model, the company has simply failed to reach the target at this stage. We do also have evidence from recent M2 drilling that as you get closer to this area the copper and gold grades increase.

M2, M4 & M1 Targets

Drilling at the main M2 zone, the most advanced of all GWMO targets in Nevada was completed several months ago and I have asked the company to RNS if they are obtaining a revised JORC. They have not confirmed or denied this simply told me that they will announce when appropriate.

We also know from recent RNSs that M4 (which could be larger than M2 ST) is progressing well and the smaller target of M1 is also progressing.

I would hope that we get clarity of these targets over the coming weeks.

Cash

I will hold my hands up and say how frustrated I was with the company early July for raising at 1.3 pence with the explanation that they had found this new mineralisation and that they wanted to drill 5 rather then the planned 3 holes at ST.

With hindsight this was quite fortunate as I would estimate that the company is sitting on around £2.5 million of cash against the post RNS market capitalisation of around £5 million. I believe that all of the company's plans are fully funded along with working capital and contingency, so I have no concerns around the cash position.

Conclusion

Investing in AIM micro caps is not easy! However, I invest in these companies as I am happy to take risk and more often than not generate a significant return on my capital over several years. I am around 1 year into my holding of GWMO and I believe that the company has a lot to look forward to over the coming months and then longer ahead.

Today's sharp, overdone, share fall with certainly bring new investors onboard and with 4 different drills taking place currently I am looking forward to the next few months. Yes, the RNS today is frustrating but we cannot expect for every hole to contain valuable finds.

I do have some concerns over the management in terms of why they did not contract multiple rigs to explore a number of holes at once and then why the decision to stop was not taken earlier but I will aim to speak with them over the next few days.

I hope that we hear on targets away from M2 ST whilst they progress the second hole and then I expect to be updated as soon as target depth is reached on this new hole. Assuming that they can drill through to target depth the stock will trade much closer, or past, 2 pence within the next few months.

I understand investors frustration but investing in AIM is a longer term play where prices can increase or decrease massively within minutes. Especially with junior resource companies.