Westgold Resources Limited (WGX) Earnings Call Transcript & Summary

Good morning, and thank you for joining us. Today, I will take you through Westgold's FY '27 guidance and our updated 3-year outlook. The headline is simple. We have a fully funded organic growth plan to lift group production from 385,000 to 425,000 ounces in FY '27 to 460,000 to 510,000 ounces by FY '29. We are investing ahead of production predominantly in the Murchison to expand our mining fronts, better utilize our processing hubs, and drive our operating costs down. The plan expands Westgold production towards 500,000 ounces by FY '29, and this excludes the important and critical Fletcher Zone at Beta Hunt. This slide captures the next steps in Westgold's evolution. We produced 387,000 ounces in FY '26. FY '27 production guidance is 385,000 to 425,000 ounces, rising to 460,000 to 510,000 ounces in FY '29. The plan going forward delivers circa 9% compound annual growth from FY '27 to the FY '29 mid-point. At the same time, installed processing capacity increases to more than 7 million tonnes per annum with all-in sustaining cost is expected to reduce to between AUD 2,640 and AUD 3,000 per ounce by FY '29 on an FY '27 real cost basis. The critical point on the right side of the slide is that Fletcher at Beta Hunt is upside to and not required to deliver the 3-year outlook. The base plan is designed to be executable from our existing portfolio of operating assets. The confidence to accelerate organic growth comes from delivery in FY '26. Westgold achieved record production, exceeded annual production guidance and materially strengthened the quality of the portfolio. After adjusting for asset sales, group ore reserves increased by 41% to 4.1 million ounces. We have 4 operating processing hubs with 5.8 million tonnes per annum of installed capacity, and the growth plan is fully funded, noting that we had $1.5 billion in available liquidity at the end of FY '26. We are committed to drilling. We will also invest more than $150 million in exploration and ResDev across the 3-year period. This is the transition we want investors to recognize. Westgold has moved from stabilizing a historically underinvested portfolio to actively investing in growth from a much stronger operational, geological, and financial foundation. A central feature of the outlook is the confidence in the inventory that supports the production target. The target is supported by ore reserves throughout the 3-year period. In FY '27, 86% is supported by ore reserves with a further 2% in measured in indicated resources, 7% in inferred resources, and 5% from third-party ore. The reserve component remains 81% in FY '28 and 73% in FY '29. That confidence has been built through sustained drilling, geological model improvements, mine planning, and development. During FY '26, Westgold added approximately 1.5 million ounces to our ore reserves at a discovery cost of around $27 per ounce. We plan to invest $50 million to $75 million each year in exploration and resource definition drilling to continue converting resources to reserves, extend inventory, and improve confidence beyond the current outlook. The Murchison is the growth engine of the updated outlook. At Meekatharra, Bluebird-South Junction achieved 1 million tonne per annum mining rates in June 2026 and is expected to increase to 1.2 million tonnes per annum during FY '27. The Murchison Open Pit program is already building strategic ore inventory and supplying open pit feed at a higher grade than the low-grade stockpiles processed in prior years. Polar Star provides a third mining front opportunity inside the established Bluebird-South Junction mine. At Cue, Great Fingall ramps up and progressively replaces lower grade Big Bell Deeps, while Big Bell transitions towards the higher-grade Big Bell Deeps area in FY '28. The mining growth is matched with processing growth. The Cue Expansion Project, the CXP, expands Cue from 1.4 million to 1.7 million tonnes per annum and the Meekatharra expansion project, the MXP, expands Meekatharra from 1.8 million to 2.9 million tonnes per annum. Together, those projects add approximately 1.4 million tonnes per annum of Murchison processing capacity and provide the most direct pathway to more production and lower unit processing costs. Through the and MXP projects, group production capacity increases from approximately 5.8 million tonnes per annum in FY '27 to 7.2 million tonnes per annum in FY '29. The sequencing is deliberate. We are prioritizing the Murchison first where growing ore inventories support the clearest near-term returns from CXP and MXP. The additional capacity allows us to increase utilization of installed infrastructure and spread fixed costs over a greater number of ore tonnes to improve unit costs. The next major processing decision is in the Southern Goldfields linked to the development of the Fletcher Zone at Beta Hunt. Rather than proceed with the previous Higginsville expansion, which was a staged concept, taking the existing mill from 1.6 million to 2.6 million to potentially 4 million tonnes per annum, we are evaluating the optimal long-term processing and haulage solution predicated on a much larger Fletcher opportunity. FY '27 is the peak investment year in the 3-year outlook. Non-sustaining capital is expected to be $450 million to $480 million in FY '27, declining to $390 million to $410 million in FY '29. The regional profile shows that capital is prioritized towards the Murchison, where it increases processing capacity at cue Meekatharra, establishes future mining fronts at Polar Star and Big Bell Deeps, and build strategic ore inventories and accelerates development ahead of production. This is a deliberate use of our balance sheet strength. We are building operating resilience, scheduling flexibility, and mining inventory now, so the business is positioned to deliver higher production at lower unit costs as these projects are completed. As CXP, MXP, and the major development programs progress, annual non-sustaining capital declines and the benefits are expected to flow through to stronger free cash generation. The purpose of the investment is not growth for growth's sake. It is to create a larger and lower cost production base. FY '27 all-in sustaining cost guidance of $2,980 to $3,380 per ounce reflects inflation in labor, energy, consumables, higher royalties, increased Murchison open pit activity, and lower grades in the Southern Goldfields. Across the outlook, the drivers of improvement are clear. We expect higher grade feed from key mines, less reliance on lower-grade stockpiles, a greater contribution from established mining fronts, expanded milling capacity, and more operating flexibility from strategic open pit inventories. On an FY '27 real cost basis, these initiatives support an expected reduction in all-in sustaining costs to $2,640 to $3,000 per ounce by FY '29. In simple terms, greater scale, more gold, and lower unit costs. Exploration and resource definition are core to the strategy. They are not discretionary activities around the edges of the plan. We expect to invest $50 million to $75 million in FY '27 and more than $150 million across the 3-year outlook. The focus is on converting and extending our 14.4 million ounce mineral resource inventory. The objectives are to convert resources to reserves, extend mine life, and create new growth options within and beyond the current 3-year period. Priority areas include Big Bell South and the 1,600 [ Shocker ] area and Cuddingwarra at Cue, Paddy's North, Paddy Flat at Meekatharra and Mason at Beta Hunt. That investment continues the work that lifted ore reserves from 3.3 million ounces FY '24 to 4.1 million ounces in FY'26 despite mining depletion. We will continue to improve the quality and convertibility of the inventory. The Fletcher Zone at Beta Hunt is Westgold's largest organic growth opportunity, an opportunity that could take the company well beyond 600,000 ounces per annum. Recent drilling supported a Maiden ore reserve of 1.1 million ounces and an updated mineral resource of 3 million ounces. Current conceptual work indicates Fletcher could add approximately 140,000 ounces per annum at steady state. But Fletcher is intentionally excluded from this 3-year outlook. There is no Fletcher production and no associated development capital in the base plan. Only approximately half of the currently defined strike extent has been tested and drilling continues to assess the ultimate scale and continuity of the system. We believe the right approach for Fletcher is to fully understand the opportunity and define the optimum development pathway before Fletcher is incorporated into a formal outlook. There are 3 work streams in defining the preferred Fletcher pathway. First, define the opportunity. Drilling continues across Fletcher to improve confidence in scale and continuity, while drilling at Mason assesses the continuation south of the Alpha Island Fault and its potential inclusion in the wider mine plan. Second, evaluate the infrastructure options. We have commenced a dedicated haulage study examining alternatives to conventional trucking and the preferred mine to surface ore transport solution. We are also assessing a larger Higginsville processing solution at approximately 4 million tonnes per annum and an alternative new processing facility closer to Beta Hunt, possibly at Spargos. Spargos' tenure we own, which is 30 kilometers away from Beta Hunt by road compared to the 80-kilometer haul to Higginsville. At a 4 million tonne per annum road haulage rate, this represents approximately $40 million a year of savings on haulage alone. More on this to come as we progress the studies. Third, select the configuration. The study outcomes will inform the preferred development layout, processing option, capital allocation, and delivery sequence. The objective is not simply to develop Fletcher. It is to select the pathway that maximizes long-term value and operating flexibility for the Southern Goldfields. This slide reinforces that the 3-year outlook is an executable baseline. Fletcher production and development capital is excluded. Polar Star is included on a measurable schedule with no acceleration ahead of its assumed contribution from FY '29. We have already commenced the decline into Polar Star and keen to bring this in early. The Murchison Open Pit Program incorporates only part of the broader open pit inventory with Big Bell South and Paddy Flat North still under evaluation. There is also no Fortnum processing expansion in the plan. Westgold have already completed the study of Fortnum that considers a 1.5 million tonne per annum processing plant, and we retain this option as upside during the 3-year outlook period. In addition, there is no acceleration of Big Bell Deeps ahead of the current FY '28 assumption. There is no production from 2 boys at Higginsville and no contribution from Fingall at Cue despite both these mines already contributing ounces in FY '27. There is also no contribution from coarse gold at Beta Hunt and no allowance for further exploration discovery, additional resource conversion, or new business development opportunities outside existing ore purchase agreements. None of these opportunities are required to achieve the current 3-year outlook. They remain options to bring that forward, improve margins or extend mine life as drilling and studies progress. To conclude, this outlook is about building a sustainably more valuable Westgold. We have a fully funded pathway towards a 500,000 ounce annual production base by FY '29. We are increasing processing capacity to more than 7 million tonnes per annum, investing in higher-quality mining inventory, and expecting a lower all-in sustaining cost and declining capital profile as the major projects are delivered. The base case is supported by our existing operating portfolio, 4 processing hubs, and current reserve and resource base. Beyond that, Fletcher provides a material organic pathway beyond 600,000 ounces per annum, alongside a broader portfolio of opportunities that are not required to deliver the current plan. We believe this approach balances delivery confidence, disciplined capital allocation, organic growth and ongoing shareholder returns. Thank you for taking the time to listen to the presentation today. We're now happy to take questions.

Thank you very much. We'll dive straight into the questions. Before we dive in, I've just got to summarize that presentation in this. There's a lot to like in this 3-year outlook. And really to explain it, it's quite simple. Bigger mines need bigger mills. Let's dive straight into the questions. First question from [ Mark Clark ]. Mark says, with NMG or New Murchison's production expected to grow over the coming 3 years, can you please clarify Westgold's planned processing arrangements for New Murchison through FY '27, '28, and '29, specifically whether Bluebird has sufficient capacity to process the expected New Murchison tonnes? Well, thank you, Mark, and I'm sure this is not the Mark Clark from Capricorn. I think there must be another Mark Clark. With respect to New Murchison's production profile, that's really a question for Alex Passmore at New Murchison. We're really excited about what Alex and his team are doing and talking about FY '27, '28, and '29, are questions best aligned to New Murchison. What we can say is that with the MXP project being committed and starting to move into construction in FY '28, we will have processing capacity at Meekatharra for New Murchison and other third-party ores, which may materialize in that time. Next question from Al Harvey at UBS. Southern Goldfields flat at 115,000 ounces next 3 years on a flat throughput of about 1.7 million tonnes per annum, noting the vent access issues impacted your grade back end of FY '26, but reserve grade of 2.3 grams per tonne. Why isn't there a grade-driven uplift in production as vent issues resolved? I'll hand that question off to Aaron Rankine, our COO.

Thank you, Wayne. So for the Southern Goldfields, we are seeing the 115,000 ounces flat. So we have got the Lakewood processing capacity dropping off this year, but we do expect a 2.2 to 2.3 head grade out of the mine. And just noting the 2.34 reserve grade is inclusive of the high-grade Fletcher.

Thanks, Aaron. The second part of Al's question, Southern Goldfields non-sustaining CapEx at $380 million over the 3-year horizon but not going into Fletcher. What's it going into? And any overlap with Fletcher/the Higginsville expansion plan? Back to Aaron.

Thank you, Wayne. So yes, the underlying capital spend at Southern Goldfields is related to a number of factors, particularly capital development in the Beta Hunt mine. We're accelerating the development ahead of the production fronts, in particular, with our bulk stoping methods and triple lift stopes coming into the mine plan, development needs to go several levels ahead of production. Additionally, we've got some power upgrades down at Higginsville, but predominantly, capital development.

Thanks very much, Aaron. Third part of Al's question. HXP -- and for those who are listening, we love 3-letter acronyms. HXP is the Higginsville expansion plan, different than the CXP, the Cue Expansion Plan and the MXP, the Meekatharra Expansion Plan. The question is, HXP study due end of FY '28, assuming a financial investment similar time, build of 18 to 24 months, fair to say the 600,000 ounce is an early 2030 story. Let me answer this question this way. We have been very careful in this 3 year about how we're sequencing the capital. CXP, Cue is first, FY '27. MXP is second in FY '28. So really, we see plant construction commitments FY '29 onwards for the HXP. Next question. It's specific to ore purchase agreements. Ore purchase agreements, margin assumptions behind these. Think NMG rolls off later FY '27, any step-up in margin expected? With respect to the current ore purchase agreement with New Murchison, our margin is fixed for the term of this agreement. Next question. Next question is from [ Marcus ] at Goldman Sachs. Can you confirm that your all-in sustaining cost outlook guidance excludes third-party ounces in the denominator? How much sustaining CapEx is included in the outlook? Can you ballpark the unit costs at each hub? Three questions in one there. I'll take the last part. We actually, specifically, define the operating cost per hub in our quarterlies, Marcus. So the detail per operating hub is there. In terms of the all-in sustaining cost, I'll hand that off to Tommy Heng, our CFO.

Thank you for the question, Marcus. And yes, the -- it does -- it is included in the denominator, the all-in sustaining cost. Thank you.

Second part of the question is, you've talked to accelerating some FY '28, '29 production. Where does that come from? And how conservative is this outlook then? Well, I hand this off to Leigh Devlin, our Chief Technical Officer.

Yes. Thanks very much for that, Wayne, and thanks very much for the question, Marcus. So '28, '29 was really baked into the FY '26 3-year outlook that came from the Murchison Open Pit program. So again, like Wayne says, we like acronyms at Westgold, so we've effectively called that the MOP. We've already started mining that. We committed to that in the FY '26 3-year outlook, and we started mining that 3 months early. So a lot of the ounce profile sits within the open pits. What we've been able to show as well, as part of FY '26, if you put the dirt in front of the mills, the mills mill it. And we hope that, that continues throughout '27, '28, '29.

Thanks for that, Leigh. Just if I can pick up on the point of the level of conservative nature of the 3-year outlook. In the previous 3-year outlook, we were very conservative, and we've learned the hard way about being -- making statements that we can't fill. FY '26 financial results, we beat our guidance on all fronts. So we are very, very confident that this 3-year outlook, there is a level of conservatism built into it, but it is very deliverable. Next part of the question. Should we expect the Higginsville mill expansion to start construction in FY '29 straight to a 4 million tonne per annum plant to support Fletcher? Or is that big mill enough for its own mill? FY '29 is the right time to be thinking about the HXP. Like I said before, where we're sequencing the capital in this 3-year outlook is very Murchison-specific is because that's where the ore build is the strongest. CXP first, MXP second in FY '28, HXP most likely FY '29. Next question. From today's provided outlook, confidence around Meekatharra hub production growth has materially improved. Two questions. Looks like the step-up in FY '29 is coming from Polar Star. Can you please provide an update? And on that one, I'll hand over to Leigh Devlin, the CTO.

Yes. Thanks very much for that, Wayne, and thanks very much, Kaan. Yes. So Polar Star is a parallel ore body to Bluebird-South Junction. So we're talking about something that's relatively capital light to get across there. Bluebird started to see run rates towards the back end of FY '26 of over 1 million tonnes per annum. And what we're sort of seeing with Polar Star is we should be able to lift that up to around 1.5 million tonnes. What we've already done is we've already put in a purpose-built Polar Star drill platform, which will double as the haulage route as well. So we're well underway to starting to develop the Polar Star ore body.

Second -- thank you, Leigh. Second part of the question, what mining and development rates need to be demonstrated at Bluebird-South Junction over the next 12 months for us to have confidence in the FY '28, '29 Meekatharra numbers. I'll hand that off to Aaron.

Yes. Thank you, Wayne. Look, the numbers we're delivering now is already where we need to be for Bluebird-South Junction. We hit the 1 million tonne run rate in June, expecting that to be ramping up to that 100,000 tonne a month, 1.2 million tonne run rate throughout this financial year. We think that's fairly conservative, and that's the numbers we need to be seeing to deliver this outlook, and we're looking to outperform that.

Thanks again, Aaron. Next, I should just touch on the whole Meekatharra story. Bluebird-South Junction over the last few years has grown significantly. We've expanded that mine. It started at 250,000 tonnes per annum. We drilled. It became 0.5 million tonnes per annum. We kept drilling. It's now, as Leigh said, the exit rate in June this year was over 1 million tonnes per annum, and we keep drilling. So what we have now in the Bluebird-South Junction mine is 2 active mining fronts being the Bluebird and South Junction loads. Polar Star will be the third mining front in Bluebird-South Junction, lifting that production rate up above 1.5 million tonnes per annum. It's a success story, which still a lot of the market doesn't understand, but there's a lot more to come from Bluebird-South Junction. Next question from [ Ganesh ]. Solid expansion plan. While delivering on this robust strategic plan, where and when do you see surprise upside potential news, which would excite the market? I'll hand that over to Leigh.

The key part that we want to talk to around this, Wayne and Ganesh, is the fact that we're investing $50 million to $75 million in our ResDev program. We've already started to do drilling on the surface to develop some of these assets that really haven't been drilled for -- some since the late 1990s. So we're drilling at the moment around Halcyon and Democrat around the Paddy's Flat trend. We're drilling in Big Bell South as well at the moment. So what we're really trying to do there is we're trying to reduce the gap between our mineral resource, which is 14 million ounces and our reserve, which is over 4 million ounces. We really want to put more emphasis on ore reserve and less on growing the resource, and that will make sure that they can fit more into these mine plans.