West African Resources Limited (ASX: WAF) is an Australian-based gold mining company with a primary focus on the acquisition, exploration, and development of gold projects in West Africa, particularly in Burkina Faso. The company operates the Sanbrado Gold Project, located approximately 90 kilometres southeast of Ouagadougou, the capital of Burkina Faso. Sanbrado commenced gold production in March 2020, achieving this milestone ahead of schedule and under budget. In addition to Sanbrado, West African Resources is developing the Kiaka Gold Project, situated about 45 kilometres south of Sanbrado. Kiaka is projected to be a long-life, low-cost gold operation, with an average annual production of 234,000 ounces over a 20-year mine life, starting from 2025.
Production guidance set in 2024 by West African Resources
West African Resources has reported a total gold production of 206,622 ounces for 2024, achieving the upper end of its previously issued guidance. The company had set a production range of 190,000 to 210,000 ounces, accompanied by an all-in sustaining cost (AISC) of under US$1,300 per ounce. This performance highlights the company’s operational strength and ability to meet its targets despite challenges in the mining sector.
The company’s ability to provide such guidance stems from several strategic factors. First and foremost, it ensures transparency and builds investor confidence by offering clear expectations for both production and cost management. Guidance also serves as a benchmarking tool, helping to align company operations with shareholder interests. Through these projections, West African Resources demonstrates its robust operational capacity and commitment to creating value for investors.
Furthermore, setting production targets allows the company to showcase its growth potential, particularly through its flagship projects, the Sanbrado and Kiaka Gold Projects. Sanbrado, which has been in production since 2020, continues to perform well, while Kiaka, set to start production in late 2025, is expected to contribute significantly to future output. The company’s guidance signals its confidence in these assets and its ability to execute on its strategic objectives.
December 2024 quarterly results far exceeding expectations
The last quarter results posted revealed 51,178 ounces of gold was produced with 47,953 ounces selling at an average price of US 2,690 per ounce. This contributed significantly to the full year gold production of 206,622 ounces with 199,550 ounces being sold at an average price of US 2,391 per ounce. This marks a strong performance in a favourable gold price environment, positioning the company well for future profitability. The higher gold prices have added a premium to the company’s revenue, underscoring the importance of Sanbrado’s operational efficiency and its ability to capitalise on favourable market conditions.
The increase in open-pit mining productivity signals a more efficient extraction process, which may contribute to a stronger bottom line as the company continues to scale operations.
The fourth quarter had significant improvements compared to the third quarter with open pit mined ounces increasing by 32%, reflecting 39% more ore tonners mined in this quarter. Underground mined ounces also increased by 8%, further attributing to the high-value potential in the Sanbrado Gold Operations.
Current Gold Market dynamics
In 2024, gold prices experienced a substantial surge, reaching record highs. As of January 7, 2025, spot gold was trading at approximately $2,644.79 per ounce, influenced by a weakening U.S. dollar and market reactions to anticipated policy changes under President-elect Donald Trump.
It is projected that gold prices could continue to rise in 2025, with some forecasts suggesting a potential peak of $3,000 per ounce. This optimistic outlook is driven by factors such as persistent global uncertainties, central bank purchasing patterns, and shifts in monetary policies.
Implications for West African Resources
The elevated gold prices present a favourable environment for West African Resources, potentially enhancing its revenue and profitability. The company’s unhedged production strategy allows it to capitalise fully on the prevailing high gold prices, thereby maximising financial returns.
However, the company must remain vigilant regarding potential challenges. In December 2024, Burkina Faso, where Sanbrado is located, implemented an increase in gold royalty rates, capping at 7% for gold prices exceeding $2,000 per ounce. This adjustment could marginally impact the company’s cost structure, adding approximately $6 to $8 per ounce to its All-In Sustaining Costs (AISC).
Additionally, geopolitical factors and fluctuations in the U.S. dollar and interest rates could influence gold prices and, consequently, the company’s financial performance. While the current outlook is positive, these external variables necessitate ongoing strategic planning to mitigate potential risks.
West African Resources is well-positioned to benefit from the current favourable gold market conditions. The company’s unhedged production approach enables it to fully leverage high gold prices, potentially leading to enhanced financial performance in 2025. Nonetheless, it is essential for the company to monitor and adapt to evolving market dynamics and external factors to sustain its growth trajectory.