Wesdome Gold Mines hit a new all-time high of C$35.35 on August 7, while gold and the GDX (VanEck Gold Miners ETF) are still well below their own records. To me, that's a clear signal of strength, and I've now bought in.

I wrote about gold and gold stocks the week before, when I added a new position in Lundin Gold (LUG). Gold has kept climbing since then and broke above its 200-day moving average. That reinforced my bullish view, so I took another close look at the sector and found another stock in Wesdome that won me over.

Wesdome is a rounding error in the GDX, just under 0.5% weight, and its market cap of roughly C$5 billion is modest too. Still, this isn't some junior at the start of its development. It's already impressing me with its operating performance.

The core portfolio consists of the Eagle River mine in Ontario and the Kiena mine in Quebec. That means Wesdome operates exclusively in Canada, a politically stable jurisdiction. Ore grades run at 7.9 grams of gold per tonne, well above the 1.5 grams averaged by comparable producers in the company's own peer group. To me, that quality is a clear plus, and it offsets the company's higher all-in sustaining costs (AISC) of roughly $1,525 to $1,700 per ounce compared with Lundin Gold. Those costs are moderate enough that Wesdome could stay highly profitable even at meaningfully lower gold prices. On top of that, the balance sheet is healthy, with debt close to zero.

The strong performance of the past few months doesn't surprise me given that quality. What does stand out to me is that the stock is still cheap despite chasing new records. The price-to-cash-flow ratio (P/CF) currently sits at 9.4, below the historical average of 11.4. That implies a cash flow yield of nearly 11%, a solid cushion against the risks. The main one: dependence on the gold price. Wesdome also runs underground operations, which come with their own set of operating risks, and the entire production base sits at just two sites. If either one runs into technical trouble, geological surprises, or delays in expansion, it would hit Wesdome far harder than it would hit a more diversified major.

I'm willing to take on that concentrated risk given the valuation and the growth outlook. What I like here is Wesdome's low-risk, capital-disciplined approach to growth. Rather than betting on one big new mine, production is set to grow mainly through better utilization of the existing mines and infrastructure, which should be far less capital-intensive to execute. Annual production is targeted to rise from 180,000 to 200,000 ounces currently to as much as 230,000 ounces by 2028, with AISC expected to stay largely stable. The bigger growth lever further out lies in additional mining concepts like bulk mining and possible open-pit scenarios, as well as in the large, only partially explored land packages surrounding the existing mines. Management also sees room for disciplined acquisitions, but the core of the growth story remains organic.

All of that adds up to a clear case for me to invest. If the gold price pulls back at some point and takes Wesdome with it, I won't see that as a reason to sell. I'll see it as a chance to build the position at a better price.

Is Wesdome Gold Mines a buy? At current levels, I consider Wesdome (WDO) a buy. The stock hit a new all-time high of C$35.35 on August 7, yet still trades at a price-to-cash-flow ratio of 9.4, below its historical average of 11.4, implying a cash flow yield of nearly 11%. Wesdome's Eagle River and Kiena mines in Canada produce at 7.9 grams of gold per tonne, well above the average of comparable producers in the company's own peer group, and the company plans to grow annual production to as much as 230,000 ounces by 2028 through low-risk expansion of existing mines rather than a new build. The main risk is that production is concentrated at just two mine sites, so any operational setback at either one would hit results hard.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. I am not a financial advisor. Always do your own research before making any investment decision.

Disclosure: I may hold direct or indirect positions (including options) in any securities mentioned in this newsletter. My opinions are my own and always honest.