Westgold Continues To Build Cash Reserves In September Quarter

Westgold Resources Limited [ASX: WGX, Westgold or the Company] is a Western Australian gold producer and explorer that was admitted to the official list of ASX in December 2016. Employing over 1000 people, the Company is the dominant explorer, developer, and gold mining operator in the Murchison region. With over 1,300 km2 of tenure across the Murchison and Bryah Basin, Westgold operates six underground mines, several open pits and three processing plants with an installed processing capacity of ≈4 Mtpa.

Strong 1st quarter cashflow despite 8 percent production decline

Despite gold production dipping from 68,377 ounces in the June quarter of 2023 to 63,104 ounces in the September 2024 quarter, Westgold continues to build on its strong cash position. Gold sales for the quarter were 62,120 ounces at an average gold price of $2888 / ounce, generating revenue of $179 million for the September quarter. Operating cash costs including sustaining capital were $129 million, compared to $127 million in the previous quarter. Mine operating cash flow achieved was $60 million for the quarter, with an All-in Sustaining Cost (AISC) of $1935/ ounce. Cash reserves are up $58 million over the past three quarters to $217 million, including gold bullion and liquids.

Westgold’s production costs remain well-managed with its AISC production cost for the quarter at $1935 / ounce, sitting comfortably within FY24 guidance at $1800 – $2000 / ounce. This number would have come in at less than $1800 / ounce if not for the 8 percent drop in gold production for the September quarter. Two new hybrid power stations were commissioned in August and October this year using a mix of gas power, battery and solar, with 2 more hybrid power stations coming online by the 3rd quarter of the 2024 financial year. Once fully commissioned, these 4 power stations combined will save 38 million litres of diesel fuel usage per year representing an AISC cost reduction of A$60 / ounce.

Corporate costs for the September quarter were $44 / ounce, well up from $32 / ounce recorded for the previous quarter. Again, lower production volume explains this cost increase.

Westgold’s decision to reduce hedging is paying off as fewer hedged ounces support consistent profit margins even if production volumes are down because the higher spot gold price immediately offsets cost increases.

FY24 Outlook

Westgold is firmly on track to deliver its FY24 guidance, although cost inflationary pressures in consumables and labour are impacting costs. A debt-free balance sheet and $217 million in cash, bullion and liquid assets leaves the Company well positioned to respond to these cost pressures.

The Company’s dividend policy of paying up to 30 percent of free cash flow and maintaining a minimum net cash balance of $100 million (after payment of the dividend) implies a minimum dividend of at least 1 cent / share for the 2024 financial year.

The Company’s fully funded resource development program is supported by 10 drill rigs currently operating in high value internal growth projects. With the hedge book having been largely runoff since August this year, Westgold is fully leveraged to a rising gold price, which is positive for the Company’s immediate outlook.