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ASX:WGX
Westgold Resources Ltd
Investment Summary
The fund managers believe that Westgold Resources Ltd is well-positioned for significant growth and profitability. Their assessments indicate that Westgold's recent merger with Karora Resources has created a top-five Australian gold producer, with production potential increasing from around 225koz to over 500koz per annum. In their opinion, the favorable gold price environment, coupled with strategic management initiatives, positions the company to generate exceptional free cash flow growth. Despite some production guidance adjustments, the all-in sustaining costs are declining, contributing to a more efficient operational framework. With a strong resource base estimated at approximately 13 million ounces and a focus on scalable operations, the company is expected to deliver a robust performance moving forward. The fund managers also highlight that the significant upside potential linked to the merger, along with ongoing improvements in operational efficiency, further enhances Westgold's attractiveness to investors.
Commentary From The Managers
L1 Capital
31 Jan 2025
$2.58
- Westgold Resources declined during the month due to a weaker than expected production result for Q2 FY25.
- The company has reduced its FY25 guidance as a result of this production shortfall.
- Significant growth is driven by the simultaneous ramp-up of two core assets: Beta Hunt and Bluebird.
- Progress on these assets has been slower than anticipated due to mine infrastructure constraints.
- Westgold is making necessary investments to de-bottleneck the assets through FY25, aiming for improved performance in FY26.
- The company is rapidly transforming into a producer of material scale, with FY24 production expected at ~230koz and projected to exceed 500koz post-FY26.
- This growth is supported by a combination of organic growth and the merger with Karora, which closed in August 2024.
- Westgold is upgrading its portfolio quality by focusing on scalable operations and investing in exploration.
- These initiatives are expected to lead to a more efficient cost structure and stronger cash flow generation over time.
- L1 Capital continues to hold Westgold Resources as they believe in the company's long-term growth potential.
L1 Capital
31 Dec 2024
$2.83
- Westgold Resources Ltd is a ~$2.5b 100% West Australian underground gold miner approaching significant growth.
- Expected FY24 production of ~230koz, increasing to ~550koz post FY26.
- Growth driven by a transformational merger with Karora Resources, completed in August 2024.
- Operations are divided between the Murchison region and the newly acquired Southern Goldfields.
- Westgold is enhancing its portfolio quality by focusing on scalable operations and investing in exploration.
- Strategy centers on scaling mines and reducing portfolio complexity.
- Organic growth potential to > 550koz in the near-term, supported by:
- Great Fingall: Project expected to begin production in Q4 FY25, adding ~50koz annually.
- Bluebird: Expansion to > 1.2Mpta from ~450ktpa in FY24, potentially increasing annual production by ~60koz.
- Beta Hunt Expansion: Growth to > 2Mtpa, exploration target of 1.5 to 2.1Moz of gold.
- Westgold currently trading at ~6x P/E multiple compared to ASX peer set at ~11.5x.
- Strong cash balance and growing production base contribute to the attractiveness of Westgold's investment thesis.
L1 Capital
30 Nov 2024
$2.81
- Westgold Resources (Long -11%) faced a decline in value following a 4% drop in gold price over the month.
- The AUD gold price remains up approximately 32% for the year, indicating potential for increased cash flow in gold equities.
- Westgold is on track to transform into a producer with FY24 production of ~230koz, aiming for growth towards ~600koz post FY26.
- This growth is supported by both organic expansion and the recent merger with Karora, finalized in August 2024.
- Westgold is enhancing its portfolio quality by focusing on scalable operations through targeted exploration investments.
- This focus on scalability is expected to lead to a more efficient cost structure over time, driving stronger cash flow generation.
Cadence Capital
31 Oct 2024
$3.22
- Cadence Capital updates their investment thesis on Westgold Resources Ltd.
- Westgold produced 77koz of gold in the recent quarter.
- The company maintained its full year production guidance of 400-420koz.
- Post-merger synergies are anticipated to reduce all-in sustaining costs per ounce by 2025.
- Cadence Capital continues to hold due to these promising production figures.
- In October, Evolution reported 194koz of gold and 19kt of copper produced.
- Evolution is also on track to meet their full year guidance.
- Their FY25 mine cash flow guidance was upgraded by $107m due to rising gold prices.
Endeavor Asset Management
30 Sept 2024
$2.67
- Endeavor Asset Management executed a decision to sell their remaining position in Australian gold miner Westgold Resources (WGX) at a price of $2.82 per share.
- The decision followed internal analysis indicating that market expectations for guidance were too lofty.
- Post-exit, WGX announced guidance that missed on headline gold production and capex.
- Since the initial investment in May, Endeavor realized a total gain of 31% on the position.
- As of the month’s end, WGX shares closed at $2.67, which is 10% lower than the average exit price.
Cadence Capital
31 Aug 2024
$2.83
- Cadence Capital last updated on Westgold Resources in March 2024.
- Westgold has completed its merger with Karora Resources, increasing its gold production from 225 koz per annum to around 500 koz.
- This merger positions Westgold as the fourth largest gold producer in Australia.
- Westgold operates with a relatively low cost of production compared to similar mid-cap listed gold companies.
- The company’s production is fully unhedged, benefiting from rising gold prices.
- Westgold’s PE ratio is currently low compared to historical norms.
- Cadence Capital believes Westgold’s share price needs to ‘catch up’ with recent gold price increases, similar to Resolute Mining.
Endeavor Asset Management
31 July 2024
$2.61
- Westgold Resources (WGX) has completed its merger with Karora Resources, positioning itself as a top-five Australian gold producer.
- The company now possesses a resource base of approximately 13 million ounces.
- Endeavor Asset Management sees potential for WGX to increase production beyond 500,000 ounces per annum.
- WGX's June quarterly report indicated strong performance, finishing the year at the top of production guidance and low end of cost guidance.
- Endeavor Asset Management anticipates significant updates from the newly merged entity, including expectations for FY25 production guidance.
- Over the past month, shares in Westgold appreciated by 8%.
Endeavor Asset Management
31 May 2024
$2.31
- Endeavor Asset Management highlights that Westgold is led by a highly regarded management team.
- The company possesses significant upside potential following the merger with neighbouring miner ‘Karora’.
- Synergies generated by this merger are expected to improve group profitability.
- Inclusion in indexes should lead to a higher valuation for the company.
- Our discounted cash flow (DCF) analysis suggests a potential upside of 30% compared to our entry price.
Cadence Capital
31 Mar 2024
$2.77
- Cadence Capital observed that Westgold Resources has benefited from a rising gold price.
- The current gold price has reached USD 2,283 per ounce, setting new all-time highs.
- In April, Westgold revised its full year production guidance from 245,000 ounces to between 220,000 and 230,000 ounces.
- The revision was due to the completion of mining at Paddy’s Flat Prohibition orebody and recent inclement weather.
- Despite production setbacks, Westgold's share price has increased over 20% since the end of February.
- Westgold announced a proposed merger with Karora Resources to create a company with more than 400,000 ounces of annual production.
- Cadence Capital continues to hold interest in Westgold due to these developments.
L1 Capital
31 Dec 2023
$2.13
- Westgold Resources (Long +29%) has seen strong rally in correlation with rising gold price (+11% in December quarter)
- Positive Q1 FY24 production update released by the company
- Approval of Big Bell expansion project announced during the quarter
- Expected addition of ~93koz per annum once Big Bell project is complete
- Expansion projected to extend mine life to 16 years
- Effective execution by Westgold’s new management team
- Substantial fall in all-in sustaining costs over the past year
- Net cash has grown to over $200m
L1 Capital
31 Dec 2023
$2.13
- Westgold production expected to grow from around 250koz to over 300koz ounces in the next few years.
- Attractive A$ gold price anticipated to remain above A$3,000/koz, supporting growth potential.
- Exceptional free cash flow growth anticipated in the coming years as production and prices increase.
- New management team has effectively executed a turnaround strategy over the past year.
- L1 Capital continues to hold due to these positive indicators in Westgold Resources Ltd.
Collins St Asset Management
31 Mar 2023
$1.31
- Westgold Resources Ltd is valued at $700 million
- Three main projects located in Western Australia
- On track to meet production budget for the year, expected to produce circa 250,000 ounces of gold
- All-in costs are projected at approximately $2,000 (AUD) per ounce
- Current AUD gold price is around $3,000, positioning the company favorably in the market
- Workforce of over 1,400 employees
- Operates four underground mines and three processing plants
- Has actively driven improvements and efficiencies in the last six months
- Company benefits from a good jurisdiction, growing JORC resource, and attractive value
- Collins St Asset Management is excited about WGX's performance prospects in the coming months and years
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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