Westgold Resources Limited (0W2.F) Earnings Call Transcript & Summary

You're joining our webinar and Westgold's 3-year outlook. I'll hand over shortly to our Managing Director and CEO, Wayne Bramwell, who will take us through a brief presentation and we'll take questions after that. [Operator Instructions]. Thanks, Wayne. Over to you.

Thank you, Annette, and welcome to everyone online, and thank you for joining us today to discuss Westgold's 3-year outlook. I'm joined here today by our COO, Aaron Rankine; and CFO; Tommy Heng, who will both be available to answer questions at the end. Slide 4, let's dive straight in. The 3-year outlook is a high confidence plan and is the first multiyear view Westgold has ever shown the market. It maps out a pathway that sees group production lift from 326,000 ounces delivered in FY '25 to 470,000 ounces in FY '28. Most critically, it sees our all-in sustaining costs fall over the 3-year outlook. The 3-year outlook is underpinned by FY '25 ore reserves only. We announced ore reserves of 3.5 million ounces in June this year, which at our FY '25 production rate of 326,000 ounces supports 10 years of production from the business. Fully utilizing our 4 processing hubs is key to the 3-year outlook. Our mills have not been fully utilized over the past few years. Our hubs like [ Mika Tara ], our largest mill, have been reliant on low-grade stocks to keep the mill full. Over the 3-year outlook, we replaced low-grade stocks with high grade ore, and this is a fundamental change to our operating strategy. We'll see group milled grades lift and operating margins enhanced. Slide 5. Production lifts and costs fall. It has taken several years to get our minds to a point where mine outputs can match or exceed our milling capacity. This has been achieved by heavy investment in resource drilling into our major assets like the Starlight underground Bluebird, South Junction, Great Fingall and Beta Hunt. All of these mines are now beginning to lift their outputs, and that underpins our confidence in the 3-year outlook. The 3-year outlook chart shows a material improvement in both production and costs from FY '25 where we delivered 326,000 ounces at an Australian dollar all-in sustaining cost of AUD 2,666 an ounce to 470,000 ounces at circa [ AUD 2,500 ] ounce in FY '28. The 3-year outlook sees greater than 1.25 million ounces produced and asset falling. Importantly, this growth is organic. It's not organic and is fully funded from our treasury and forecast free cash flow. Slide 6. The 3-year outlook is underpinned by June '25, reserves and resources. Key to our confidence in this plan is that 80% of the material mined over the 3-year outlook is in reserves. Slide 7. The last 3 years has been about drilling our core assets, improving our mine outputs and investing in our processing plants to make them more reliable. The 3-year outlook you're seeing today is all about our processing hubs. It's about building high-grade stockpiles in front of them. Optimizing feed blends to increase throughput and squeezing more out of our smaller mills with incremental capital investment. Most importantly, it's about expanding Higginsville to circa 2.6 million tonnes per annum to process all of Beta Hunt's expanded output. Having 4 processing hubs gives Westgold strategic influence across the 2 gold fields we operate in. Processing infrastructure of scale is extremely valuable in one of Westgold's biggest value drivers. Slide 8. keeping our mills full with higher-grade ore will increase free cash flow. Let's dive into each of our processing hubs one by one, starting with our largest [ Mikatarahub ] of 1.8 million tonnes per annum. The plan for the 3-year outlook really is Bluebird South Junction underground will expand and will continue to expand conservatively reaching 1.2 million tonnes in FY '28, though we're already approaching those numbers towards the end of this financial year. Great Fingall is the first high-grade stope out of Great Fingall. We'll see in FY '26 ramping up to a scale of 0.6 million tonnes per annum in FY '28. This injects grade into the merchants on business, we have not seen with the expectation of Great Fingall being circa 4 grams per tonne. Another new addition to the [ merchants ] on business will be the reactivation of open pits during FY '27. Again, the secret source to often many of our processing hubs is soft oxide ore. The intent with our own pit program is to build buffer stocks and add softer ore to our hard ore blend. The Higginsville will up 1.6 million tonnes per annum currently. Beta Hunt infrastructure upgrades will support a 2 million tonne per annum output run rate by the end of H2 FY '26. Key point to be noted in the 3-year outlook, there is no contribution from the Fletcher Zone. 2 million tonnes from Beta Hunt predicated on 2 mining fronts. The Western zone A Zone and the Western Flanks. In the 3-year outlook, there is no flat jump. Additional grade into the Higginsville mill is being provided by the 2 boys mine at Higginsville. And over the 3-year outlook, we plan to commence the [ Spargos ] underground, a short distance from the Higginsville mill. Currently, the 2.6 million tonne Higginsville expansion study is running and will be complete early in the new year. Construction is planned to commence in FY '27 with this construction or the additional throughput available to us during FY '27, FY '28. The last 2 mills we own is the Q hub and the Fortnum hub, 1.4 million tonnes per annum of capacity currently and the Fortnum hub of 0.9 million tonnes. Both of these processing plants are currently being optimized. They have ore in front of them and their mines and the mills are well matched. Slide 11. The 3-year outlook is conservative by design and has material upside. There are a summary of initiatives that the Westgold team is actively advancing that could see us outperform the 3-year outlook. Those initiatives include further expansion of the Bluebird South junction underground, improvements in operational performance specifically in our underground fleet productivity and expansion of the Higginsville mill to up to or more than 4 million tonnes per annum. Within that 3-year outlook, there is no contribution of course gold from Beta Hunt. We see course gold, but we've not baked that into the 3-year outlook. And expansion of the merchants and open pit programs in areas like [ Mecather ], we have 96 old open pits, which provide additional opportunity and upside to the 3-year outlook. Exploration and resource development conversion, our team has shown that, that given the right resources that they can convert resource to reserve and with $150 million committed over the 3-year outlook, we're confident that this team can continue to deliver. Another opportunity to outperform the 3-year outlook is the fact that Westgold has 3 underground mines in care and maintenance. Patty's flat, Comet South [ eminTriton ], both are all mines, which are sitting in care and maintenance, and we're revisiting how we crystallize value from those assets. All or any of those could produce additional ore for some of our processing hubs. Slide 12. This has been a really short presentation because we're all very keen to get to the questions part. But in closing, I'd just like to say this. The 3-year outlook is a high confidence plan that enhances Westgold's value proposition. It is focused on organic growth that reduces our all-in sustaining cost and sees production lift to circa 470,000 ounces by FY '28. It is about creating sustainable value for our shareholders employees and stakeholders for the long term. In closing, I would like to pose a question for our online audience. What is the fair value for a 470,000 ounce unhedged Australian gold producer. Thank you for your time today, and I'll open the floor to questions.

[Operator Instructions] We have a question here from Tyson. Tyson is asking, when do you expect the 1.8 million tonnes per annum Bluebird mill to operate at full utilization can you provide an indication of how much is expected from open pits given Bluebird south junction is now expected to reach 1.2 million tonnes per annum in FY '28. Previously flagged for end FY '26. I think we'll hand this question over to our CEO, COO, rather Aaron Rankine, Aaron?

Yes. Thank you, Anette. In short, the Bluebird mill is currently now operating at the 1.8 million tonne per annum run rate as of Q1. The key change in the 3-year outlook is the displacement of lower-grade stockpiles in that mill with higher-grade ore feeds. The open pit program, we'll take up some of that from FY '27. However, we do see opportunity to outperform as well with Bluebird South junction. So really, optionality is the key in terms of lifting the grade profile of Bluebird.

Aaron, can you just speak to -- there's another question there about Bluebird South junction needs to be clear, in the 3-year outlook, we're not -- we're forecasting the underground to hit a 1.2 million tonne per annum run rate by FY '28. Just explain the nuances about where we are with Bluebird South junction today?

Yes. Thank you, Wayne. As we have talked to the market, we have been optimizing the mine design of Bluebird South junction and there's 2 key aspects of this. Firstly, is opening up workfronts in South Junction. We've teamed landed on on a new mine design, which we'll start sharing with the market next quarter. That will open up work areas faster than our current estimates have baked in. And additionally, there's the opportunity for Polar Star to come into the 3-year outlook. We've not included that in any of our numbers at this stage, and we're actively pursuing that as an additional mining [indiscernible].

We're -- look, Keith, good. Thank you very much, and he's got our valuation at $9 billion from [ EliptoGades ]. Keith like we like what you're saying. Question here from go, Hugo says, high want on costs, as you have provided a breakdown of the production outlook between the hubs. Can you please -- sorry, the question is gone. Can you please provide a rough guide on the all-in sustaining cost across the hubs over the outlook then to give some comfort around how achievable the $2,500 per ounce all-in sustaining cost is by FY '28. Can you please provide some color on what you've assumed around mining and processing costs? Who would like to take that one?

Let me front in that one. Hugo and then Aaron and dovetail on that. What we've been doing in the quarterly is we provide asset breakdown for the Northern business, the Murchison and the all-in sustaining cost for the Southern gold fields. We don't give it blow by blow, particularly in the Murchison whereby we sell bringing ore from Q to [indiscernible]. So this hub-and-spoke model blames those costs in the north. So a much better way to look at this thing is all-in sustaining costs make for the medicine, all-in sustaining costs for the Southern Goldfields. And in the detail of the quarterly, as you can see tonnes and grade recovery from each individual mine. So one of the criticisms of Westgold in the past, there's been so many moving parts, hard to model. We've now set up the scenario whereby you've got all the ingredients to do it mine by mine, but we really focus on all-in sustaining cost of the Murchison versus the Southern Gold field. Might just hand over the question the back half of your question about how achievable is the 2,500. All-in sustaining cost to Aaron.

Thank you, Wayne. The simple way I think to look at all-in sustaining cost for the business is we have not assumed any significant improvement in our cost per mining ton what we're seeing, we've been relatively conservative on that front. What changes the cost profile for the business is the increase in grade through the mill by filling them with high-grade sources at a relatively stable and conservative mining cost per tonne and the addition of buffer to our processing plants with the mines outperforming and the addition of open pit. So we expect to see far more consistent stable performance out of our mills at a higher grade. So no real improvements baked in, in mining cost per tonne, but the lift in grades is the improvement in dollars per ounce.

Thank you, Aaron. We have another question here. What is the open pit contribution to the Murchison mills Wayne?

Thanks for that. Again, I'll just front end this question where the fact that there is contribution from -- to the Murchison mills from open pits, one contribution, which is live and active and baked into the 3-year outlook is the ore purchase agreement with New Murchison from the Crown Prince open pit. So that ore is being processed in [ Mecathera ] now. And the current mine schedule for that mine is 30,000 tonnes a month, 30,000 to 50,000 tonnes a month for 2 years. I'll hand over now to Lee Devlin to speak about the the West gold open pit program, which is also included in the 3-year outlook.

Yes. Thanks, Wayne. Yes, the Westgold Open pit program is one that we have -- we're going to start in FY '27. And one of the aspects that Wayne tried to initiate for us and creating the 3-year outlook was to create a sense of buffer around our mills, which is somewhat novel for Westgold. It also provides a bit more higher grade rather than using up the low-grade stockpiles that we've got floating around. So the open pit program will encompass CGO MGO and FGO. So encompass the full Murchison only a portion of that is going to get taken up in the 3-year outlook. So all up, we're looking at over 3 million tonnes worth of material getting mined as part of that program, which will be over a 5-year period. So only a short amount of this is captured within the 3-year period. So it will provide a small but very valuable ounce profile in terms of the wider Murchison as well, but allows us to great rainy day stocks that were set up on the ROM, ready for us to process when we're on acquired.

Thanks very much for that, Lee. And that's very key to the point you cannot optimize these processing hubs without stockpiles in front of them. Having high-grade stocks in front of these mills or soft oxide material, we'll see throughput increase, typically grade lift and recoveries lift. All of that adds up to additional ounces.

Thank you. We have a question here from Ray. Ray is asking, have we hedged any of our high cost inputs like diesel for the duration of the forecast. We'll hand that one to our CFO, Tomme Heng?

Yes. Thank you for the question, Ray. No, we don't hedge for any of the gold price or high cost inputs. Actually, for diesel, our reliance on it, we'll be diminishing hopefully, as we embark on more of our clean energy transition.

Thanks, Tommy. We have a question here from Douglas. Douglas is asking, when will Spargos underground development be started? And what grade can be expected for Spargos. I'm going to hand that question to our COO, Aaron.

Thank you, [indiscernible]. [ Fargo ] is relatively simple. We'll be starting the development of that in FY '27 in our outlook. We're expecting head grade out of that mine of more than 3.5 grams. It's a relatively small contribution to Southern Goldfields, though. I think it's about -- we a 4-year mine life at about 20,000 tons a month coming out of that mine when it's in full production.

Thank you, Aaron. A question from Sky. Guy is asking, can you provide some guidance on economics of mines in care and maintenance?

Thank you, Scott. It's Wayne here. How do you flat comment South you Triton, we're revisiting all of those assets now when most of those assets were closed at a gold price of circa 2,500. Today's gold price of 5,800 makes those things a different proposition.

Thank you, Wayne. We have a question from Charles. What are you expecting for the FY 2027 production? What can be expected for an average grade for FY '27 and '28.

Back to me, I'll take that one. Thank you, Charles. I mean, the chart in the outlook shows 420,000 ounces forecast for FY '27. Just seeing the rest of your question and grade. What we're seeing in this business, Charles, is that the West Gold business is moving from typically a group milled grade of 2 grams. It's rapidly moving up past 2.5 towards 3 grams per tonne. And that's what's going to drive the operating margin in this business over the 3-year outlook, putting higher-grade ore through our processing plants, generates more ounces and lower our costs.

Thank you, Wayne. We have a question from David. David is asking what percentage of production does Westgold intend to hold as fully on the balance sheet versus selling into the market? I'll hand that one to our CFO, Tommy.

Yes. Thanks, that, Dave. We have no set percentage. As we look at it now, Westgold is not short of its treasury balance and its balance sheet is strong. So I would say, on any given month, it really depends on the cycle at the end of the quarter. At the end of the quarter, as and when the month end and the gold pool happens, dictates what we hold at the end of the month. So really, we have no set percentages that we hold.

Thanks, Tommy. And we have a question here from Frank -- Frank is asking, could you please provide more details on the cooperation between new Murchison Gold and West Gold, both in the short and the long term. I'll hand that one to our Chief Growth Officer, Simon.

Thank you, Anne. So we have a very strong working relationship with new Murchison. Under the strategic alliance, which is ongoing, it gives us opportunities for further business relationships. But at Crown Prince itself, the original or the initial ore purchase agreement runs for 2 years with options to extend that past that point should the resources continue -- so we continue to work with new Murchison and look at all sort of opportunities that come forward from them.

Another question here. what contribution does Crown prints have for production and all-in sustaining costs and could life extend into FY '28?

Yes. Look, I'll take that one, Aaron here. So we've been fairly conservative on our view of Crown prints given we don't control it. And basically, we're expecting 15,000 to 30,000 ounces this financial year. and relatively steady state in the 3-year outlook. New Murchison does have plans to extend in our drilling, but we're not relying specifically on that or source in the long term. We're really focused on the ramp-up of Bluebird South Junction, which we think will pair nicely with the [ Meekatharra ] hub in the long run.

We had a question from Ganesh Kaness asking are any lumps and bumps expected in production in coming quarters due to mill madame or rain or weather? And Ganesh is saying he loves Westgold initiative regarding the employee investment plans and focus on safety. I'll hand over to Wayne to take this one.

Thanks for that, Ganesh. Look, things go wrong in mining every day. I mean, that's what we get paid for to manage those challenges. But what we're doing to manage that challenge is really exactly what we've explained here, putting stockpiles in front of these processing plants irons out some of those lumps and bumps. And if one of our mines has a hiccup, I mean we've got more in front of these mills on the mills keep going. What we're really, really, really proud about is the second point of your question. In our recent employee share sacrifice offering. One in 5 of our employees have taken up shares in the company. So now we've got employees who are acting and thinking like owners, and that's -- we're really proud that our employees are now becoming shareholders in this business.

Thanks, Wayne. We have a question from Hayden. Hayden is asking, should we assume similar ranges for FY '27 and FY '28, for production and all-in sustaining costs. As for FY '26 is asking is that plus or minus 5% or wider. I'll hand back to Wayne to -- Aaron -- would I like to take that one?

Yes. Thank you, Annit. Look, the outlook beyond FY '26, we've included, I'd suggest more conservatism given that it's further out. So really, I'd be thinking of those numbers as a baseline for performance of the business.

Thanks very much, Aaron. We have a question here from Hugo. And you guys saying you've highlighted the outlook is conservative. Can you please elaborate on where you think you've been conservative? And please conservative in the outlook. Is it great reconciliation, mine ramp-up motilization? Where have we been conservative? I'll hand back to I'll hand back to Wayne.

Thanks for that, Hugo. I think our team, everyone sitting in this room has learned the hard way about being overly optimistic in what we tell the market. We've been conservative in everything to do with this 3-year outlook. Based upon more recent disappointments in the market. We are driven here by under-promising and over-delivering, and that is something we've learned the hard way over the last 12 months.

Thank you, Wayne. We have a question from Larry. Larry is asking when is the stand duty on the Karora assets due to be paid. I'll hand that one over to our CFO, Tommy.

Thanks, Larry. That's due to be paid somewhere in the middle of this month. Focus on [ 5 million ].

Great question, Larry. At this one, we are waiting for this one to come. But we finally received the invoice and told me we'll be making that payment very shortly.

We've got a question here from Keith. He has what's happening between 2 boys and Trident. And I'll hand that one over to Andrew to respond to?

Thank you for the question. Obviously, we're pretty excited about [ Tubes ]. When we took over the mine, we had 2 month mine life. And over the past year, we spent a significant amount of time and effort drilling it out for a 15-month mine life. What's happening between the 2. We have some defined targets that we'll be drilling through the second half of this year, and we expect that mine life to extend beyond the 15 months flowing into the next financial year.

Thank you very much for that Andrew. We've got another question here from Hugo. Are you guys asking why has the studied [ Borton ] mill expansion being excluded from the 3-year outlook? I'll hand that to Wayne.

Thanks, Hugo. Great question. We call this the FXP, the Fortinet expansion plan. And simplistically, it's just about priorities. The priority at the moment is to get Higginsville up to 2.6 or bigger because that's the thing that moves the dial for us in the Southern Gold fuels. Currently, the Fort Mill and the Starlight mine really well matched and we're seeing the grade come up in Starlight.So there's no significant pressure to expand Fortnum yet. Look, we're all really interested in expanding Fortum, but it's a function of priorities and timing at the moment. That's why it's not been baked into the 3-year outlook. It does provide upside. And depending on how the 3-year outlook plans, we'd all be very well disposed to seeing that Fortnum mill grow to 1.5 million tonnes.

Thanks for that, Wayne. We have a question here from Rick. I think this is one for our COO, Aaron. And Rick is asking, do we have enough miners to handle this build-out of production? Also, do we anticipate any problems with all the areas to be mined in beta Hunt or are there any traffic problems with all the holders, et cetera? Do we need another decline that a few questions in there for you. Aaron, if you want to break this time?

Yes. Thank you, [ net ] -- and good question. And something, Rick, we're very cognizant of is the risk of the labor market in Western Australia. So there's a number of ways we're tackling this. Firstly is diversification of risk. So we've introduced contract mining into great fingle. We've got contract mining at Mako. Our open pit programs will be contract mining. Open pit mining itself is a relatively different skill set. So we're able to diversify the risk of mining there as well. And additionally, our larger mines are more productive, and we're getting more ore with the same or less amount of miners out of bigger stopes. So being more productive and diversification of that risk profile. Second part of the question around the decline at Beta Hunt. No in the 3-year outlook, we don't need additional haulage route. That mine is already established between declines in a trucking loop. When we look at the study for Fletcher, that will likely require additional hoisting options, but that's under review.

We've got a question here from David Brennan. David asking, can you talk about what would be needed for the trigger to expand Higginsville further from 2.6 million tonnes per annum to 4 million tonnes per annum , also a reminder on the CapEx to expand to 2.6 million tonnes per annum. I'll hand back to Wayne.

Thanks very much, David. To answer your question, not much. I mean the study is being predicated on a 2.6 million tonne per annum flow sheet, but we will oversize the crushing circuit and the SAG mill so it is capable of doing 4 million tonnes. We're actively, if we can find a crushing circuit and a mill to suit secondhand in the market, we've already got preapproval to do it. But again, you can't bake that into our plan. So at this stage, the study will hit the market in January. The Board will make a very quick FID financial investment, and we'll be into this thing like Demons. So really, yes, we're all -- we can see that in some sense, expansion of Higginsville is a no-brainer because we know better Hunt can do up to 2 million tonnes by the end of the year and supported by 2 boys and open pits. We've got excess ore.

All right. Thank you. A question here from Hugo. Following up on costs. As you focus on costs at the hub level, what should we assume as the all-in sustaining cost profile at the 2 hubs over the 3-year outlook. Is -- the Southern gold fileds below 2,500. And what about the merchants on is that is at above in FY '28 by how much. I'll hand that one over to Lee to this respond.

Yes. Thanks very much, Hugo. Yes, the asset across the merger will stay relatively consistent. We would expect us to stay consistent with the run rates that we're seeing currently across the 3-year outlook, but also the establishment of the [ OPT ] program. Now once the down south though, once the Higginsville expansion is completed, the asset will drop and drop significantly. So that would be the plan there. Across the business, though, we haven't baked in too many of those major reductions in costs, and a lot of that will come with the operational improvements. So we're already starting to see our lines at the moment and some that Aaron has started to initiate as well.

I think we have a question here from keep asking, have we revisited sons of Aaron for possible east waste mineralization?

Thanks, Keith. Yes. Look, we've done a reasonable amount of work in the area over the last 12 months, and we have considered the East West. There's certainly some high-grade type mineralization there, but quite discontinuous based on the drilling that's being done today. But we continue to reevaluate that whole Higginsville can. And I noted your question earlier around where to voice goes as it heads towards driven. So there's a lot of interesting stuff for things bill that's yet to be explored properly.

We have another question here from. He's asking, well, Westgold keep some of its gold in bullion instead of cash like black cat. I'll hand over to Tommy for that one.

Yes. Thank you for the question. I can't comment on [ Black ] at but I'll comment on Westgold. We, on a quarterly on a monthly basis to have a bullion on hand. So that's the simple and short answer.

Thanks, Tommy. I think -- are there any more questions? I think we're getting through them at quite a pace. If anyone's got any more questions, please speak now. or I might hand over to Wayne to rap up.

Thanks very much. Thank you, everyone, for patching in today. Look, this is an important day for Westgold. It marks another stage of our evolution to be able to articulate a clear conservative 3-year plan that sees this business grow conservatively. It's not just about growth for growth's sake. This is about margin because the only thing we can control is our costs and this plan sees our all-in sustaining costs for over the 3-year outlook.

Thanks, everyone, for joining us and for your questions. We sincerely appreciate the interest, and we'll catch you on our next call, and please feel free to be in touch with us. off-line, if you require any further information. Thank you.