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 five processing plants have an installed processing capacity of 7 million tonnes per annum.
First half-year 2025 production volume disappoints the market
Westgold’s December quarter production volume disappointed the market which saw an immediate eleven percent sell-off in the Westgold share price.
The price has subsequently recovered slightly but today remains more than nine percent lower since the announcement that gold production in December was 80,866 ounces of gold. This follows production of 77,369 ounces in the September quarter. The market’s concern is that the FY25 production guidance of 400,000 – 420,000 ounces may not be achievable in that the first half has delivered just 39 percent of this full-year guidance volume.
Westgold appears to have reiterated their original FY25 production volume guidance by stating that production is expected to increase in the second half, consistent with guidance. It is reasonable to assume that this statement implies that production growth in the second half will be sufficient to close the production shortfall and meet the 400,00 – 420,000 production guidance. If this is the case, then the market sell-off appears to be overdone.
However, experienced investors know that value is not presented simply because a share price has fallen. Price information is free and the reason it is free is because it contains no information about value. This is where the market sell-off gets interesting because Westgold management have consistently referred to the current FY25 420,000 production estimate and have articulated a path to exceed this FY25 production guidance in FY26 – FY27 onwards. At the Company’s AGM and related market release on 28 November 2024, specific reference was made to a 500 – 600,000 ounce per annum production base from FY26 and beyond.
Subsequently, on 9 January 2025, management referenced the production ramp up at both the Bluebird and Beta-Hunt underground mines with infrastructure upgrades that are critical to increasing mine outputs. The upgrades are scheduled for completion at the end of the March quarter. Management also highlighted that development of the Great Fingall mine near Cue remains on track, with first ore anticipated in the June quarter of FY25. This investment in long-term capacity of its producing mines, especially Bluebird and Beta Hunt, are Westgold’s key drivers of growth in the June 2025 half-year.
If it’s in the news, it’s in the price
Although market sentiment turned negative immediately following release of the December quarter production volume, Westgold’s medium-term prospects remain soundly based. This is because management have laid out plausible explanations around the path to annual gold production to the 500 – 600,000 ounces level from FY26.
This enhanced capacity of Westgold’s expanded asset base and continuing investment in mining output and processing capacity should continue to deliver shareholder upside, at least over the medium-term.
