Westgold Resources Limited (WGX) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Westgold Resources Q1 FY '25 quarterly webinar. I'll now hand you over to your first speaker for today, Wayne Bramwell, CEO and Managing Director.

Thank you, Shane, and welcome, everyone, to today's webcast. I would like to acknowledge that I'm speaking from Perth, Western Australia on the traditional land of the Whadjuk people of the Noongar Nation. I would also like to acknowledge that our operations are hosted on the lands of other First Nations people. Westgold respectfully acknowledges the traditional owners of the land on which we operate and honor their enduring connection to country. We pay our respect to Elders, past, present and emerging. Next slide. I'm here today with my fellow executive team members who will speak to their areas of accountability in the business. Joining me today, in order of appearance, Kaisan Critchell, our Interim Chief Safety and Sustainability Officer; Mel Wren, our Chief People Officer; Tommy Heng, our Chief Financial Officer; Andrew McDougall, our Chief Technical Officer, who will also be speaking for our interim COO, who is on leave today; and Simon Rigby, our Chief Exploration and Growth Officer. This was a truly transformational quarter for the company. We completed the $1.4 billion merger with Karora Resources, quite literally doubling our business in scale. We commenced trading on the TSX. We joined the ranks of the S&P/ASX 200. We welcomed 600 new members to our team. And pleasingly, we did this while integrating our operations to deliver our highest gold production yet, 77,000 ounces to be exact. We did this transaction on the back of the efforts of our team and the cash flow generated from 6 successive quarters of disciplined cash build in the Murchison. We did not need to raise equity from the market or draw down on our debt facilities. Today, we remain unhedged, debt-free and positioned for growth into FY '25/'26. Critically, our team has a clear strategy to integrate, capture and build increasing economic value from our much larger portfolio of West Australian assets. With that, I'll hand over to Kaisan Critchell, our Interim Chief Safety and Sustainability Officer.

Thank you, Wayne. Our total recordable injury frequency rate increased to 7.37 injuries per million hours worked. This was, unfortunately, an increase of 7.59% quarter-on-quarter, not the direction we're used to going in, but still a 16.44% reduction for the full year. We had 2 lost time injuries for the quarter, increasing our lost time injury frequency rate from 0.62 to 1.00. The high-potential incident frequency decreased from 6.83 to 5.18. There were no psychosocial harm events during the quarter. One of our values is to safety. It remains our priority to support our expanded team to achieve this with a uniform focus on safety across the whole business. I'll pass over to Mel now, our Chief People Officer.

Thank you, Kaisan. As Wayne pointed out, we have added 600 people to the Westgold team in the course of the merger with Karora. So much of August and September were dedicated to the integration of the 2 teams into 1. We are pleased with the results so far. Turnover is at the lowest it's been, and we've had positive feedback on our emerging culture. During the quarter, female participation in the workforce increased from 12.5% to 14.6%, which reflects our efforts in this space. We also rolled out an attractive family and medical leave package to the extended business, with pleasing increasing in the number of males also utilizing the parental leave, either as primary or secondary carer. At the end of the quarter, we employed a team of 2,100 employees and contractors across the expanded group. I'm happy to take any questions about our team and how we find top talent in this market. But for now, I'll hand over to Tommy to talk about the Q1 results that our people have delivered.

Thank you, Mel. Next slide. This picture tells a great story of what has been truly a transformational and transitional quarter, and I will now talk about the highlights that transpired. Next slide. We opened the quarter with $263 million in cash, bullion and liquid investments. To Wayne's point, this cash position was built over 6 quarters of disciplined performance at our operations. As this graph shows, we underwrote our operations, generating underlying operating cash flows, paid the cash component of the merger together with associated merger costs, and finished the quarter with over $100 million in cash, bullion and liquid investments and, notably, without drawing down on the debt facility. Key items I wish to highlight are: cash acquired of $32 million from Karora on 1 August is net of the Macquarie debt repayment of $44 million and Culico Metals and Kali Metals contribution of $11 million as part of the merger; operating cash flows for the Southern Goldfields include August and September only; growth capital projects relate to the investments on expansions at Beta Hunt, Big Bell, Great Fingall development, Bluebird South Junction and Starlight mine sites; PP&E were for processing facility upgrades, paste plant, camp and infrastructure upgrades and underground equipment. The merger cost of $153 million relates to $125 million cash consideration paid to Karora Resources shareholders; $21 million for change of control payments to Karora executives and directors; and $7 million on adviser costs, namely legal, financial, taxation and corporate advisory. Next slide. Putting the merger itself and the cash flow implications aside, given this was also a transitional quarter, we are pleased with the underlying results. We achieved record gold production of 77,369 ounces, representing 3 months of production from the Murchison and 2 from the Southern Goldfields. Our all-in sustaining cost of $187 million is higher as it now includes the Southern Goldfields for the first time to the order of $66 million. Key items to note with respect of the all-in sustaining costs are: the Murchison tender commencing commercial production and processing of stockpile buildup that were unable to be processed due to the weather events late in the prior quarter, offset by the lower processing cost at Bluebird processing hub, which is undergoing planned maintenance on crushing and milling circuits in September, to prepare the processing hub for higher throughputs and increased delivery of higher-grade ore from an expanded Bluebird South Junction in H2 FY '25. Notably, our all-in sustaining costs will improve quarter-on-quarter following integration of the Southern Goldfields operations and as our growth projects ramp up to production in H2 FY '25. Next slide. Projects that will reduce our all-in sustaining costs and increase production over the year includes opportunities for third-party ore purchase agreements. As you can imagine, there are a number of smaller miners out there with ore and no mill and the keenest to capitalize on the gold price. We are happy to assist, where possible. Growth opportunities such as Polar Star Lode at South Junction and the Beta Hunt Fletcher zone are 2 very exciting pillars for growth, both of which come online in the second half of the financial year. I will leave my colleague, Simon, to talk more about these. We're also very focused on exercising cost discipline and realizing the post-merger synergies that we are currently assessing. It is in light of these and other opportunities, together with our existing production profile, we maintain on cost for our FY '25 full year production guidance at between 400,000 and 420,000 ounces and the cost guidance at $2,000 to $2,300 per ounce. I will now hand over to Andrew to talk more about our operating results and also our capital investments in Q1 FY '25.

Thank you, Tommy. From a group perspective, we're happy with the results in what was a transitional quarter. We received record gold production at a record gold price and cash flow generation despite a period of transition, and pro-rata production is in good order. Our capital investment of $58 million was largely in line with our previous quarter of $64 million. Our capital programs are progressing well at key growth targets, including Bluebird South Junction, Beta Hunt and Great Fingall. During the quarter, our focus has been on the integration of 2 asset portfolios and 2 asset teams, deploying our people and our resources at the right place at the right time. Our operations in the Murchison delivered just under 53,000 ounces of gold for the period. Our costs remain within guidance at just under $2,300 per ounce. Costs were also slightly impacted by the higher percentage of stockpile ore processed in quarter 4 due to rain delays. Capital invested in the Murchison is progressing well as we invest more increasingly in Bluebird South Junction, stepping from 0.5 million tonnes to 1.2 million tonnes per annum in the second half of 2025. We made some adjustments to the Bluebird mill during the quarter to accommodate for higher throughput and have ordered additional equipment ahead of the ramp-up. Turning to the next slide. We produced 24,480 ounces of gold from the Southern Goldfields, with the result representing just 2 months of production from the ex-Karora assets. The all-in sustaining cost was just under $2,700 per ounce. That said, in August and in September, we made basic changes to the operation and we'll see those benefits flow through into FY '25 H2. Pleasingly, Beta Hunt is on track to achieve a consistent throughput rate of 2 million tonnes per annum in the second half of the year. We are already starting to see those rates on a daily basis. In quarter 1, we invested in a growth capital of $39 million, largely on our planned expansions for our assets of Bluebird South Junction, Beta Hunt and Great Fingall. We also invested $19 million in plant and equipment, with $5 million of this on processing facilities and $5 million on the Big Bell paste plant. We also invested $14 million in exploration at which point, I'll hand over to Simon.

Thank you, Andrew. Turning to the next slide. I would like to provide a short update in relation to the exploration and resource definition activities across the business during the quarter, where we have continued to unleash the drill rigs. Moving to the next slide for an update on resource definition activities. During the quarter, up to 11 drill rigs were operating across the business on resource definition-related activities with a particular focus on the outstanding growth opportunities at South Junction and Fletcher. In relation to South Junction, on the next slide, as per the most recent market update on September 5, assay results continue to impress with the South Junction system remaining open down plunge 800 meters below surface. During the quarter, the company released both an updated mineral resource estimate and ore reserve estimate for South Junction, which were highly encouraging. But it's important to note that, as per the ASX announcement of September 5, a substantial amount of down plunge drilling has been completed since these estimations, and this data will be incorporated into the next resource estimation update. It should also be noted that the Polar Star Lode, while included in the current mineral resource estimate, was not included in the updated ore reserve estimation. And mining studies are underway to bring Polar Star into the mine plan. Turning to the next slide on Beta Hunt which, of course, was the key driving factor behind the Karora merger. This system is very large and has significant upside potential both for parallel loads and the southern extensions where up to 3 kilometers of the system has not been tested. Of early significance is the Fletcher resource definition program currently underway as shown on the next slide. The Fletcher zone represents just one of many opportunities we see at Beta Hunt. The lode system, which parallels Western Flanks 300 meters to the west, was not identified until 2016 and not advanced until 2023. Based on the Karora drilling today over 2 kilometers of strike length, West Gold released during the quarter an initial exploration target comprising 1.6 million to 2.1 million ounces, with a Stage 1 target being the southern half of the zone of 0.8 million to 1.2 million ounces. Drilling of the Fletcher system has now been accelerated with an additional 2 Westgold drill rigs to what was previously a single rig campaign. Turning to the next slide. In addition to the resource definition programs, greenfield exploration activities also continued during the quarter with a series of drill programs across the targets in the Meekatharra and Fortnum regions. In addition, extensive target generation and drill program development was undertaken both in the Murchison and Southern Goldfields regions, with drill programs kicking off during October. With that, I will hand back to Wayne on the next slide.

Thank you, Simon. We now have 2 growth drivers in our business. In the Murchison, we will see the outputs from Bluebird South Junction grow during FY '25. And in the Southern Goldfields, we are setting up Beta Hunt to consistently deliver greater than 2 million tonnes per annum run rate. These are exciting times. Capital allocation is key at Westgold. We are now focused on allocating that capital to the assets, which can generate the highest returns for our shareholders. Next slide. In closing, Westgold continues to evolve. Let me leave the listeners with this. Westgold is now rapidly becoming one of Australia's leading gold producers. We are unhedged. We are debt-free. We have a wealth of growth opportunities across 2 of Australia's richest gold fields. And importantly, we had the flex in our balance sheet to make these opportunities a reality. We are on track to deliver FY '25 guidance of 400,000 ounces. But most importantly, we now have a larger and aligned team very focused on driving cost out and production up across 2 of WA's most productive gold fields. And with that, Shane, I'd like to close today's presentation and open up the chat line for questions.

Thank you, everybody. [Operator Instructions] Your first question comes from Nate, "Wayne, Simon and Andrew, thank you for the opportunity to ask the following questions. When will the company be providing the market with a detailed plan for expanding production from 400,000 ounces to its longer-term aspirations?"

Thanks for that, Nate. We've had these assets now for less than 3 months. We're doing a full asset review and building out a far more detailed 3- to 5-year plan. We just have to do the work, and that will take a bit of time. But as an interim, the plan is to put a strategy document into the market soon to sort of give people more color around the key growth drivers in the business.

And just a follow-up question from Nate. Is there anything you can say regarding the Meekatharra growth projects? And perhaps, could we see an exploration update covering the company's current package?

Nate, I'll hand over to Andrew McDougall to talk about things like South Emu-Triton and what else is happening in Meekatharra.

Thanks, Wayne. Yes, certainly, we are looking at all of our prospects, and we have such a great range of mineral tenements across MGO. We're looking to evaluate them as part of our asset strategy. We do see ourselves getting back into South Emu-Triton even testing Rand and Boomerang in the coming second half. Around Meekatharra itself, we've talked around Polar Star and some of the great work that Simon and his team has done at defining those opportunities. So we'll be looking at executing another operation at Polar Star through our study work in the second half of the year.

Okay. Shane, can you flag up the questions? There was a question there was a question there about rightsizing the package. I'll hand that to Simon to detail.

Thanks, Wayne. Obviously, as a business now, the company has 3,200 square kilometers of highly prospective tenure. That's a large amount of land. Our team is currently working through that and prioritizing the pipeline of targets we wish to test. It is likely that some of those parts of that package at some point, we will look to joint venture or divest, but not until we complete our project reviews and come up with a detailed pipeline of targets we want to test over the next few years.

Thank you. Your next question will come from Mark, "Given Bluebird is a large contributor, can you give some indication on guidance of grade and costs over the next couple of quarters before getting into the higher grade at depth?"

Bluebird South Junction will continue to move up to 120,000 tonnes per month. We are only in the early stages of ore drive development and footwall development across that asset, with great resource definition drilling defining that. We expect to have really good definition drilling of that target, taking our measured indicated beyond 12 months into 2 years through H2. That will give us great confidence into the production rate. We do see it extending extensively beyond what we currently have in our mine plan as per the drilling indicated by Simon.

Okay. Your next question, from Nate, "Is the company contemplating expanding the throughput at Higginsville if Beta Hunt can achieve 2.5 million tonnes per annum over the medium term? And what might that look like?"

Nate, great question. Absolutely, a 1.6 million tonne per annum in Higginsville is not big enough, and we started a study now to look at a 2.5 million tonne expansion. Basically, the plan is to have our largest mine, Beta Hunt, feed our largest mill, Higginsville, and that will maximize returns and reduce our operating cost.

And a follow-on from Nate, "Regarding Starlight, with the benefit of the extra mining crew, has the underground operation achieved the improved mining rates? And is there more upside to this?"

Thanks for the question, Nate. Yes, so far, we're seeing improvement. We are also investing in electrical and ventilation infrastructure through the second half of the year that we'll see a step-up further. So at the moment, we're near filling the mill capacity. But if we seek to go beyond that, there are small improvements, even the plant we're looking at, to increase throughput as it stands.

And finally, are you seeing operational efficiency as you further progress through the 100-day post-merger period?