Westgold Resources Limited [ASX: WGX, Westgold or the Company] is one of Australia’s top five gold companies and is ranked in the ASX200. The Company is the dominant explorer, developer, and gold mining operator in the Murchison and Southern Goldfields regions of WA with tenure of more than 3,200 square kilometres. The Company owns and operates its six underground mines and its modern underground mining fleet that provides greater cost control and operating flexibility. The Company’s processing plants have an installed processing capacity of 7 million tonnes per annum.
Targeting up to 600,000 ounces of production from FY26
In an upbeat presentation to shareholders at its recent AGM Westgold for the first time publicly referenced its production target of 500 – 600,000 ounces per annum of gold from FY26 onwards. This compares to planned production guidance for FY25 of 400 – 420,000 ounces of gold.
Westgold intends to achieve this substantially higher production target by investing in mine and mill expansions through a planned $235 million capital expenditure program and a $50million investment in exploration drilling.
In the second half of FY25 the Company intends to articulate a path to 600,000 ounces of production by FY26 and substantially higher free cash flow by FY27. This production target is made possible by Westgold owning two of Australia’s most abundant goldfields. These are Southern Goldfields and the Murchison goldfields, which cover 3,200 square kilometres of ground tenure, and have 5 processing mills with a combined processing capacity of about 7 million tonnes of ore per annum. The Company employs 2,127 people, using 170 items of heavy underground equipment, and currently deploys 19 active drill rigs.
Outstanding share price performance
Westgold’s minimal reliance on external funding to meet its growth objectives, has enabled the Company to remain unhedged to the rising gold price. This is because lenders typically require gold production to be hedged to provide future gold price certainty to support dependable cash flow forecasting.
The consistently rising trajectory of the gold price in the past few years has proved highly lucrative to Westgold shareholders. For example, on 1 July 2023 the Westgold share price was $1.45 and a year
later on 30 June 2024 the share price was $2.42. Today the share price is above $2.80. This implies that if the gold price continues to rise, the higher gold price will be reflected in a higher Westgold share price. This partly explains why investors often say that the optimal way to gain exposure to the gold price is to own shares in an unhedged gold producer like Westgold.
Several local and global institutional investors have meaningful exposure to Westgold shares. These include Van Eck Associates (7.8 percent), L1 Capital (7.3 percent), Vanguard Group (5 percent), State Street Global Australia (3.5 percent), and Blackrock Inc (3.4 percent).
Looking ahead
Westgold is one of Australia’s largest unhedged gold producers, backed by a balance sheet with $250 million of undrawn facilities and a rising production profile.
In the period ahead as Westgold increases its market capitalisation on the back of higher gold production, and assuming a constant gold price, it is most likely that institutional buying support will be maintained as the Company’s index weighting on the ASX and TSX (Toronto Stock Exchange) continues to grow.
This index-driven buying support, combined with the planned path to 600,000 ounces of annual gold production from FY26 is likely to provide considerable buying support for Westgold shares over the next couple of years.
