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WestGold Resources Limited [August 2020 Review]

westgold gold mining company review

WestGold Resources Limited (‘WGX’, ‘the company’ or ‘WestGold’) is a top-10 Australian gold explorer and producer with three operating gold mines in Western Australia and has the foundations in place to establish itself as a major player in the Australian Gold Sector.

The company’s gold inventory comprises more than 9 million oz and annual production has averaged more than 250,000 oz over the past three years.

The company’s strong growth profile is likely to continue to attract the attention of institutional investors, contributing to share price impetus in the mid-term. Currently the company has commissioned and operates three production facilities in Western Australia. These are the Murchison Gold Operations, Fortnum Gold project and the recently commenced Cue Gold Operations. These are long life projects, underpinning WestGold’s status as a steadily growing producer destined for a bright future.

WestGold is in a very strong cash position having recently decided to, in the words of Chairman Peter   Cook, ‘cash up’, so as to be in a strong position to execute on the company’s long-term development plans.

WestGold divested its shareholdings in all outside entities during the June quarter to focus its working capital needs for its production capabilities. This clear focus is another positive aspect of the company’s strategic intent. 

Quarterly production for the June quarter was strong at 59,789 oz. and Group gold sales were 66,234oz, generating revenue of $152M based on an achieved old price of $2294/oz. Cash cost of sales was $1299/oz. This explains why WestGold’s cash position is so strong, closing the quarter with $137M cash, and now debt-free, with the exception of equipment leasing commitments.

The company has a favourable environmental impact record with no environmental breaches recorded against the company during the June quarter. The impact of the COVIF-19 virus has been minimal, with the Group maintaining its operations at 95% capacity.

The hedge book was reduced by 30,000 ozs during June quarter and currently stands at 200,000 oz at $2062/ oz, so WestGold will continue to benefit from current record gold prices. The counterparty to all of WestGold’s hedging is Citibank which is rated A+ by Standard & Poor’s, placing the quality of the hedge book at a relatively high level in these uncertain times.

The company successfully completed a $45m capital raising in May this year through a placement of 20 million shares at $2.25 a share. The raising was strongly supported by local and international institutions.

The Board has recently undergone a restructure. Mr Peter Cook stepped back from operational management on 1 July, but remains as Westgold’s Executive Chairman until December 2020, to focus on strategic growth options for the Group.

The intent is for Mr Cook to transition to Non-executive Chairman once the new management structure is operating effectively.  Ms Debbie Fullarton will assume the role of Group Chief Executive Officer (CEO). Ms Fullarton, previously Westgold’s Chief Financial Officer (CFO) will now oversee the Group’s two key divisions – the Gold Operations Division and the Mining Services Division. Ms Fullarton will report directly to the Executive Chairman. Ms Fullarton joined Westgold as CFO in May 2018 and has developed a strong understanding and fiscal control of the Group’s various projects and assets since that date. A chartered accountant by profession with more than 25 years of experience in financial and operational management within the resource sector, she started her mining career with De Beers in South Africa.

After immigrating to Australia in 2000, Debbie worked for a number of resource companies primarily in financial management roles.

This deliberate focus on fiscal strategy is considered to be a positive move by market pundits.

The company re-entered the S&P All Australian 200 Index on 22 June 2020. Westgold was previously in the index until June 2019 when it was removed due a reduction in its rolling market capitalisation. The recovery enabling re-entry, 12 months later, validates the refocus of the organisation on its core production assets. Being a member of the ASX200 exposes Westgold to a deeper investment audience, boosting research coverage and stock turnover.

As a growing and purely Australian gold business, with no debt, long-life production assets and now in the ASX 200, WestGold shareholders have every right to be optimistic about the gold producer’s future.  

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