Westgold Resources Limited (0W2.F) Q2 FY2026 Earnings Call Transcript & Summary

Hello, and welcome to the Westgold Resources December 2025 Quarterly Report Call. Our presenter today is Wayne Bramwell, Managing Director and CEO. We'll answer questions at the end of the presentation, but you can type them and submit them at any time. Over to you, Wayne.

Thank you, Steve, and hello to everyone on the call. Thank you for taking the time to dial in today. With me on the call, I have Aaron Rankine, our Chief Operating Officer; and Tommy Heng, our Chief Financial Officer. I'll provide a quick overview of what has been another record quarter for Westgold before handing over to Tommy and Aaron to discuss the financial and operating results. Let's get into it. Slide 4. Our second quarter features a record cash build, record gold production, and we achieved a record gold price. Let's unpack that. How did we achieve this? In Q2, we generated an underlying cash build of $365 million, double the $180 million underlying cash build of Q1. Our treasury includes cash, bullion and liquid investments. This increased by $182 million for the quarter, net of several items, including the repayment of a modest $50 million drawn debt against our corporate facility. This has now closed out and sees us debt-free. We paid $76 million in stamp duty on the Karora transaction. That's a one-off payment. Our recent dividend and share buyback costs of $29 million was an outflow. We also saw outflows of investments of $60 million in our key growth projects and $6 million on exploration. Inflows for the quarter included proceeds from the final payment on the Lakewood transaction of $25 million plus $1 million received from Alicanto as a deposit on the Mt Henry-Selene transaction. Pleasingly, we closed the quarter in a very strong financial position with $654 million in cash, bullion and liquid investments. Importantly, we produced 111,000 ounces of gold during the quarter at an all-in sustaining cost of $3,500 per ounce, and we realized a record achieved gold price of AUD 6,356 per ounce, just shy of $3,000 above our all-in sustaining costs. Importantly, excluding the gold price-linked cost of our OPA, our all-in sustaining cost for our production was $2,945 per ounce. I'd like to note that while our OPA has a higher gold price-linked costs attached we elected to maximize the volume of soft high-grade ore purchase during the period. This was a strategic call to deliver increased cash flow and it achieved that. Slide 5, the waterfall chart. Effectively, we have achieved a net increase in liquidity of approximately $290 million for the year-to-date. Our strategy is about building cash as cash is king, and we're happy to see our strategy delivering the cash builds we desire. The balance sheet strength gives us flexibility and optionality in this business and provides the financial horsepower to deliver the 3-year outlook and investigate options to bring value forward for our shareholders. Slide 6, a quick recap on our 3-year outlook. We've developed a clear road map to increase our gold production from 326,000 ounces in FY '25 to 470,000 ounces from FY '28 at an all-in sustaining cost of around $2,500 an ounce. This high confidence executable baseline is predicated on organic growth opportunities at our existing operations, underpinned by proven resources. It is essentially a mined grade upgrade and mill optimization strategy that will see us invest sensibly in our mines and mills to allow us to maximize and better match our milling capacity with higher-grade ore sources, replacing lower-grade sources to produce more gold at a higher margin. You may recall, this plan excludes a number of upside opportunities, which are already in train and which we will seek to bring forward into the 3-year period. During the quarter, we maintained a laser focus on the plan framed in the 3-year outlook. I'll let Aaron talk in more detail about our operational performance for the quarter. But in the context of our 3-year outlook, pleasingly, we are already seeing progress. Our investment in mine infrastructure at Beta Hunt allowed greater development during the quarter. This development sets us up to sustainably ramp up the mining rate towards 2 million tonnes per annum and potentially access new mining areas. We fired the first stopes at Great Fingall during the quarter, a key milestone in our high-grading transition tactic playing out at the Cue Hub. Likewise, the high-grade stopes of Starlight delivered great results at Fortnum that will upgrade the mill feed to this hub. Slide 7. Importantly, our operations are performing as planned, and we're focused on delivering our 3-year outlook, and this discipline is already improving our outputs. We maintain our sure and steady outlook in terms of this 3-year outlook. We maintain a conservative estimate for third-party ore purchases going forward as we don't control mining of those sources. And so we maintain our production and cost guidance for FY '26, confirming we expect to produce around 365,000 ounces for the period, being the guidance midpoint and an all-in sustaining cost of between $2,600 and $2,900 excluding the ore purchase agreement ore. Before I hand over to Aaron, I just want to touch on our safety stats. I'm disappointed to report that our TRIFR trended in the wrong direction in Q2 with a rate of 9.32 reflecting an increase in reportable hand injuries. While this outcome was partly the result of our increasing focus on safety, governance and reporting, this is the first time this indicator has increased since FY '23. And our entire leadership team share my very clear commitment to do all we can and must to turn this metric back in the right direction. The safety of our people is nonnegotiable. We're certainly investing time and effort into better reporting and with better reporting, we're getting better statistics, and that allows us to make better decisions in the safety area. I'll hand over now to Aaron to share some insights into our operational results for Q2.

Thank you, Wayne. And moving to Slide 9. Here, we show our continued improvement in operational performance. In the quarter, we benefited from the addition of oxide ore from our OPA. Bluebird underground continued to ramp up to plan. At Fortnum, we benefited from strong underground performance and the grade in the Galaxy area of the mine. Our costs were slightly up on the gold price linked to OPA and the ramp-up preparatory works in the Southern Goldfields, including increasing development rates. Slide 10. This shows more detail on our underlying group performance. Our mines and plants are performing well and grade is up. Slide 11, the Murchison. Our 3 hubs all outperformed our plan and improved quarter-on-quarter. Meekatharra was the standout. Our team adapted quickly to the available oxide material for the blend lifting plant throughput by more than 30% and lifting recovery to 95%. Fortnum continues to surpass our expectations with strong mining production, grade up and strong processing performance, leading to a more than 6,000 ounce lift quarter-on-quarter and tracking ahead of plan for the year. Cue also improved and we celebrated firing the first Great Fingall restope as mentioned by Wayne. This strong performance led to $196 million in net mine cash flow for the Murchison region. Slide 12 shows our updated level layout that is unlocking performance at Bluebird. We have cracked the code on managing the Bluebird ground, and we are delivering to the plan. Slide 14. Southern Goldfields production was steady as we expected. Importantly, our development, our leading indicator for production is lifting month-on-month. Mining production is lifting. Our infrastructure is in place. We have stockpiles building, and we are set up for further increases in Q3. In summary, operations at Westgold are performing strongly. We're going well, and we're continuing to improve. I'll now hand over to Tommy.

Thanks, Aaron, and hello to everyone on the call today. On to Slide 16. Strong cash generation positions us exceptionally well to fund growth, absorb volatility and continue delivering strong returns to shareholders. I'll touch on the highlights. Our bullion sales were up 21% quarter-on-quarter on higher production and at the end of the quarter, had $49 million in closing bullion inventory. Our realized gold price increased to 6,356 an ounce, giving us a very pleasing margin of $2,856 per ounce. Importantly, Westgold remains fully unhedged, a position we don't envisage to change anytime soon. Our quarter-on-quarter all-in sustaining cost increased related primarily to higher development at Beta Hunt, which readies us for our growth strategy at this operation and of course, our all purchase strategy to drive cash generation, as Wayne outlined. The strong margin of $2,856 per ounce realized on our higher sales volume for the quarter, effectively doubled our net mine cash flow for the period. Furthermore, we reasonably expect our margin to further improve in the second half of FY '26 with lower cost as our operating strategy continues to play out and with a number of major one-off cost items having already been disposed. I'll speak to our cash flow on the following slide. Slide 17. We built $182 million in cash, bullion and liquid investments this quarter, closing with $654 million on hand. The underlying cash build for Q2 of $365 million before the one-off items, as already outlined, eclipses the entire FY '25. On capital allocation, we invested $48 million in nonsustaining capital and continued our investment in exploration and resource definition, investing $6 million over the quarter. We finished the quarter in a strong position. Our balance sheet is exceptionally healthy with $654 million in closing cash, bullion and liquid investments, ensuring we are well funded to execute our growth strategy. And importantly, we are debt free with the repayment of the $50 million debt drawn in FY '25. Slide 18. Before I hand back to Wayne to wrap up, I would like to touch on the continuing shareholder return that Westgold is committed to. We declared a $0.03 per share final dividend for FY '25 and have upgraded our dividend policy for FY '26 to reflect our growing confidence in the business. In addition, we've launched a 5% on-market share buyback program, a clear signal of our belief in the value of our shares and our disciplined approach to capital management. These initiatives are underpinned by strong cash flow generation and a robust balance sheet, positioning us to continue rewarding shareholders whilst investing in growth. We paid $28 million in dividends during the quarter and commenced on the on-market share buyback. With that, I'll hand back to Wayne.

Thank you, Tommy. What a fantastic set of numbers. Let's jump straight to Slide 20. To streamline our portfolio and focus on high-margin scalable assets, we have started the asset divestment process. During the quarter, we announced the sale of the Mt Henry-Selene project to Alicanto Minerals Limited for a total consideration of $64.6 million, comprising $15 million in cash, $19.6 million in Alicanto scrip and up to $30 million in deferred consideration. It's worth noting Alicanto script has now almost tripled the transaction issue price and we, as Westgold will share Alicanto's success through our strategic shareholding. The transaction is consistent with our strategy to unlock value from assets that would otherwise remain dormant within our greater package. To that end, we continue to progress the planned divestment of Peak Hill and Thales, which like Mt Henry-Selene assets that sit outside of our longer-term plan. Slide 21, Valiant Gold. This really excites me. We are demerging our noncore Reedy's and Comet assets in the Murchison into a new soon-to-be ASX-listed called Valiant Gold. Like the assets on the previous slide, Reedy's and Comet assets that have value, but under scale and don't feature in Westgold's longer-term plans. Their proximity to each other and to our processing hubs lend themselves to become a great value generator under a smaller focused well-funded management team. Valiant will raise circa $65 million to $75 million in with a $20 million priority offer for eligible Westgold shareholders. Following the raise, Westgold will retain a 44% to 48% cornerstone equity position in Valiant. As part of this transaction, we are seeking to enter into an ore purchase agreement with Valiant, providing them with a fast-track pathway to cash flow. I think of this as an analog to the most recent deal we've done with New Murchison. We're an independent team, mines and sells order us and Westgold processes it. So far, that's working fantastically, and we expect the same outcome from Valiant. Slide 22, final slide. For Westgold, in the second half of FY '26, it's all about building cash. And from these numbers, it's clear the cash doesn't lie. Westgold is debt-free, unhedged and momentum continues to build. If you're not investing in Westgold, check it out, there's a lot more ahead. Thank you for your time today. Now straight to questions.

Okay. Our first question is from David Gay. Are there any plans for an uplisting of shares in the U.S. market?

Thanks for the question, David. No plans at this stage.

Okay. Your next question comes from Douglas MacFarlane. What was the stock build at Beta Hunt. Aaron, that might be one for you.

Yes. Thank you, Doug. Stockpiles at the end of the half at Beta Hunt and Southern Goldfields sit at circa 150,000 tonnes.

Your next question comes from Lawrence Hill. The guidance set in August for the ore purchase was between 15,000 and 30,000 ounces for the year with approximately 25,000 already in the ore purchase. If this slips, will guidance lift for Beta Hunt?

Yes. Thank you, Lawrence. I'll take that again. So we're maintaining a conservative approach to our OPA, in particular, the first quarter saw the easier oxide dirt come to our mill. So with the OPA that we don't control, there's a conservative outlook and a lot of things went right for us this quarter, with our own internal business. So we are maintaining a conservative outlook and maintaining our guidance as Wayne stated.

We'll pause now to allow people to enter in some more questions, if there are any. All right. The next question comes from Paul Kaner. Just on the OPA, what additional benefits are you realizing here from processing this material?

Thank you, Paul. Aaron. I'll take that again. So there are numerous benefits from this oxide period; Crown Prince was up over 30%, I believe at mill for the quarter. And our OpEx was significantly up, more than 25% in terms of that mill with that blend.

Wayne, the next one is for you. What is the plan for the cash being collected? And how do you plan to leverage for future value development?

Thank you for that question, Ganesh. As we've said, it's all about building cash this year to give us maximum optionality over shareholder returns and reinvestment into the organic growth opportunities we have within the group.

The next question is also from Ganesh. Would Canadian investors on the TSX have the opportunity to invest in Valiant? Okay. So, Wayne, you take that one.

At this stage, no. No. This -- the Valiant will basically be restricted to ASX holders.

Thanks, Wayne. Next from Hugh Maxwell. How will drilling at Fletcher and Mason be seen since the last update?

We'll hand that question to Simon Rigby, Chief Growth Officer.

Thank you, Wayne. So on the Mason front, our extensional target south of Fletcher, we have 1 rig operating on about hole 3, working our way through a 6 to 8 hole program. So more information will come on that in the next quarter. In terms of Fletcher, the ongoing program for infilling Stage 1 to convert resource to reserve is underway, along with the first part of Stage 2, which is the northern extension of Fletcher. So that drilling will sort of accelerate a bit more as we go into H2.

The next question is for you, Aaron. Great Fingall. Can you please guide on the mining rate and ounces for the rest of FY '26.

Thank you for the question. So Great Fingall for the remainder of this year will be patchy on our production. So we're looking forward to see some consistent output. So we've been fairly conservative on Great Fingall as we're mining up against the old workings as we open up work areas into FY '27 is when the consistent production of the Great Fingall will start.

Okay. Following question from Sudhanshu as well. Starlight, can the grades seen in FY -- in the financial year for Q2, be expected to continue in the rest of FY '26?

Aaron?

Thank you. Yes. Look, so Starlight had a cracking quarter on grade. And no, we don't expect it to sit at that over 3-gram level. We have seen steady increases on prior quarters, and we do expect it to be above what it has historically produced. But now that Q2 was a fantastic quarter for Starlight and based on a specific mining area that had higher grades.

The next one from Paul Kaner. The mining rates at Bluebird, how is that tracking to your longer-term target? And when will you get to this run rate?

Aaron?

So thank you, again. So Bluebird is going really well. What we're seeing is our development is outperforming our expectations and production is pretty much bang on where we want to be. So we are ramping up doing that in a steady systematic fashion, and we expect to exit FY '26 into FY '27 at that sort of 1 million tonne a year run rate.

Next question from Greg Osman. How much gold in reserve does the company hold currently? And how long will this last? I think it's a question on mine.

I'll take that. Each of these mines now have extensive mine life in front of them. But as a group, our last report, we reported 3.5 million ounces of reserve for the company. On last year's production of 326, circa 10 years of reserve life, but we are building that reserve every year through drilling.

Another question from -- on guidance from Kevin. Just want to make sure I'm understanding this correctly, FY '26 production guidance includes the OPA, but asset guidance does not. I'll take that -- sorry, I'll send that to Tommy.

Thank you, Kevin. The FY '26 guidance remains, and it includes what we have said was the OPA between 15% and 30%. In terms of the cost, the cost we've done already 25,000 ounces from the OPA. So from here onwards, it has to exclude the OPA guidance cost.

The next question comes from Adam Baker. How many ounces of the OPA material are expected in the second half of FY '26?

Yes. Thank you, Adam. I'll take that. As mentioned, maintaining a conservative approach on our view of the Crown Prince mining that we don't control. We are expecting that to drop off significantly from what we saw in Q2 with the trend moving from the fresh -- pure oxide material into transitional and fresh and the mining rates at Crown Prince slowing down as that pit gets deeper.

The next one from Chris Ripple. Can you please talk to any trends and changes in general industry operating costs, labor availability, consumable inputs?

Thank you, Chris. The one, obviously, is the glaring one is the increase in the gold price and royalties. So that's going in tandem with the gold price that will be 1 within -- not within everyone's control. That will be the key one.

Next question comes from Chris Freeman. Do you intend to maintain the Bluebird mill at 2 million tonne per annum rate.

Thank you, Chris. So the 2 million tonne rate came from oxide. We are doing a lot of business improvement unlocking work to get the most out of our mills. While we have a high oxide blend we can maintain that throughput as that drops off, that will lower the overall throughput of the mine. But as mentioned, we are undertaking a review of open pit work, which could potentially provide us with a maintained oxide blend to optimize the throughput rate at Bluebird.

Okay. The next question is from John Ogden. We're not seeing much M&A in the gold sector. Is this because the gold companies at present do not think the present gold price is sustainable, hence, don't want to do top of the market deals. That one is for you, Wayne?

Thanks for the question, John. I don't think anyone knows where the top of the market is. Today, we sold gold at AUD 7,068 an ounce. And in response to your question about M&A, I think the gold miners are too busy trying to print money, to be worrying about this just at the moment.

Next question is from John Ogden. Any exciting new discoveries or potential new ore sources in the package. Simon?

Thanks. Look, Westgold is always very active both in its brownfields and greenfields exploration activities. Obviously, our more advanced targets such as Fletcher and Mason are getting a fair bit of attention. But the greenfields teams are out there testing targets as well. As those targets advance, and if they get to a point where they're going to be significant to the business, obviously, there would be an announcement around that. But at this stage, it's business as usual with great support for both brownfields and greenfields exploration across the business.

One from Sudhanshu. Fortnum expansion project. Any updates on that front, including drilling updates on the open pit shell. One for you.

Yes. Thanks for the question. We have done a lot of drilling around Fortnum but we've been highly focused on the underground. So continuous underground hits on trend allowed us to keep drilling on that trend for 4 drills. There's been exciting results coming out at depth as well drilling through on finding mineralization trends where we were before. That's maintained our focus over the short term.

I'll hand over to Wayne.

If I can just add to that, the Fortnum expansion project, which we call FXP, still sitting there in the sequence. But the current focus in terms of mill expansion is the Higginsville expansion plan. As we've said in the quarterly, that study is close to finish and the intent is to report those numbers and seek FID for that from the Board during Q3. That's the first mill that we will expand.

There are more questions. At this stage, I'll hand it back to Wayne to -- for closing remarks.

Thank you, everyone, for patching in today. Look, these are a great set of numbers, but I can assure you we're not high-fiving ourselves on this side of the mic. This year, the focus is very simple, consistent operational delivery. This has been a good quarter, which we are pleased with, but what does success look like in this business, consistent delivery of over 100,000 ounces safely per quarter. I'll leave you with that thought. Today, Westgold is unhedged, debt-free, and the momentum is building. Thanks for your time today.