Westgold Resources
(ASX:WGX), the operator of the Bluebird and Big Bell gold mining operations in Western Australia, has made a daring prediction that its costs will ease in the coming financial year. In a recent update to the ASX, the company provided further details of its projected production and cost guidance for 2023-24, showing optimism for the future.
The forecast for the new financial year indicates production estimates of between 245,000 and 265,000 ounces of gold, with an All-In Sustaining Cost (AISC) ranging from $1,800 to $2,000 per ounce. This is a slight improvement from the previous guidance figures disclosed in the June quarterly report, which suggested production levels between 240,000 and 260,000 ounces at an AISC of $1,900 to $2,100 per ounce.
Westgold attributed the optimistic forecast to several factors, including steady state production levels for the Big Bell and Bluebird underground mines, "right sized" mine plans for Paddy's Flat and Starlight, and an expected 17,000 ounces from the Fender underground mine near Cue.
The company's June quarter performance has already shown support for the lower costs forecast, with a 13% increase in production and a 15% reduction in AISC compared to the previous quarter.
Despite its bold forecast, Westgold emphasized that it remains conservative in its approach to production and cost guidance. While maintaining growth capital profiles in its existing mines, the company is also investing $60 million in its organic growth pipeline to expand production into FY25. These growth opportunities include projects at Great Fingall, the Big Bell Expansion, and the restart of the Fender underground near Cue.
CEO Wayne Bramwell expressed confidence in the company's position, stating, "Westgold delivered its guidance in FY23, hitting the top end of production guidance and mid-point of costs. This was achieved while undertaking an organisational transformation which has placed the Company in a position to build cash and enhance profitability on a sustainable basis." He added that the business is now structured to deliver safe and profitable ounces, with a clear growth trajectory into FY25.
Westgold plans to fully fund its capital expenditure from the cash flow generated in 2023-24. This cash flow is expected to be enhanced due to the cessation of fixed forward gold sales contracts starting in August.
Bramwell highlighted the company's focus on prudent financial management, stating, "Our safety, cost-out, and efficiency programs will continue to drive productivity in FY24 and with full exposure to the gold price from August, we will continue to build balance sheet strength." He further emphasized, "The business is now structured to deliver safe and profitable ounces and critically, our FY24 growth ambitions are funded from our existing cash resources."
Investors have responded positively to the news, with Westgold shares trading around a 52-week high of $1.74 in recent days. The company's disciplined approach to potential acquisitions, such as not entering a bidding war for Musgrave Minerals, has resonated well with investors.
As Westgold Resources continues to strike gold with its cost-easing forecast and strategic growth plans, the company remains focused on building a solid foundation for sustainable profitability in the challenging yet promising world of gold mining.
