Margin over ounces: Westgold's strong production results




Westgold Resources (ASX:WGX) Managing Director Wayne Bramwell provides an update on the company, discussing drivers behind production results, the gold price, and plans going forward.

Peter Milios: We are talking today with Westgold Resources (ASX:WGX). WGX has a market cap of $700m. Westgold is a dynamic and responsible explorer and developer of gold mines, operating in the prolific gold fields of outback Western Australia. We welcome WGX Managing Director Wayne Bramwell. Wayne, welcome to the network.

Wayne Bramwell: Thanks for the opportunity.

Peter Milios: Wayne, you have recently reported some strong gold production results. Can you give us some colour on how and why this was achieved?

Wayne Bramwell: Quarter four was a fantastic set of numbers, 68,000 ounces at a very low all-in sustaining cost. It was really the culmination of some cost and efficiency changes we made to the business over FY23. So, yep, Q4, great set of numbers, but we worked up all year to get the business in that shape.

Peter Milios: Recent results also showed a reduction in production costs. How was this achieved?

Wayne Bramwell: Absolutely. And our costs continue to come down. I mean, for FY23, we guided to 1,900 to 2,100, all-in sustaining. We ended up at close to 2,000. FY24, as we are in now, we still think we can shift the cost style in this business through increasing efficiencies and continuing to focus on ways to optimise the business, so we do see a downward trend in costs.

Peter Milios: Can the production and cost-saving momentum be maintained going forward?

Wayne Bramwell: We believe so. Again, the focus this year is continuing to enhance margin. This is not about ounces at all costs. Driving our costs down is something we focus on every day, and we still believe there's still ways to push cost out and productivity up in the business. This year we are seeing free cash increase, and key to that is the fact that our fixed forward hedge program is complete and we're now fully exposed or fully leveraged to the gold price.

Peter Milios: The gold price has been strong over the last few months. Do you see this continuing in future?

Wayne Bramwell: Absolutely. Look, like all Australian gold producers, we are price takers. We are spectators to the US dollar gold price, but what people don't see is the Australian dollar gold price. The Australian dollar gold price today is nearly $3,000 an ounce. That's a fantastic price in anyone's book. For us, what we really focus on is costs. Costs we can control, revenue we can't, so on that basis we watch the gold price, not much we can do about it, the only thing we can control is our cost base, and that's really our focus.

Peter Milios: What resource drilling does the company have planned going forward?

Wayne Bramwell: We spent $19m last year on drilling out our four main mines. Continuing to extend those mines this year, we planned to spend $25 million on a resource development exploration drilling, and that's really in two areas -- continuing to expand the existing mines and start to drill out the next set of targets, which, internally, we've got a very strong organic pipeline.

Peter Milios: What is the current status of the company's hedging position, and what is the hedging strategy going forward?

Wayne Bramwell: Everyone has a view of hedging, but for where we are in the journey now, we have no fixed forward sales in place. Very happy to take a view about the gold price. We're currently fully leveraged to the gold price, and with the Australian dollar gold price heading towards $3,000 an ounce, it's a good place to be. Our balance sheet's strong. We don't have any debt. We don't need to hedge at this point of the journey.

Peter Milios: Wayne, what is the status of the company's takeover offer for Musgrave Minerals (ASX:MGV)?

Wayne Bramwell: In a word, lapsed. We walked from this deal. We put in a price for these assets. For us, they were a want, not a must, and another group was prepared to pay more, so we booked the profit and moved on.

Peter Milios: Lastly, Wayne, what can investors look forward to over the next three to six months?

Wayne Bramwell: Absolutely. Look, the trend is your friend. Westgold has now done two quarters of positive cash. We've built cash on our balance sheet for two quarters. That's the plan for Q1 and also Q2. We're going to put our head down, focus on our development projects, try and focus on margin over ounces, and create more value for the shareholders.

Peter Milios: Wayne Bramwell, many thanks for your time.

Wayne Bramwell: Thank you.



Name Peter Milios

Peter Milios is a recent graduate from the University of Technology - majoring in Finance and Accounting. Peter is currently working under equity research analyst Di Brookman for Corporate Connect Research.