Westgold Resources Limited (WGX) Earnings Call Transcript

Thank you, everyone, for joining the call today. With me is Wayne Bramwell, Managing Director and CEO of Westgold Resources. Over to you, Wayne.

Thank you, and hello, everyone. Welcome to Westgold's September 2026 Quarterly Results Call. Joining me today are Aaron Rankine, our Chief Operating Officer, and Tommy Heng, our Chief Financial Officer. We'll walk through today's numbers before opening up the floor for questions. Slide 4, a strong start to FY '27. Safe and profitable ounces is Westgold's mantra, safety first. In Q1, we recorded no lost time injuries and our LTIFR reduced to 1.17. We also saw a strong improvement across our key leading safety indicators, supported by sustained frontline engagement, critical control verification and leadership field presence, reflecting our ongoing focus on fatality prevention and critical risk management. Now to our business performance. We've delivered a strong start to FY '27, producing 98,400 ounces at an all-in sustaining cost of $2,912 per ounce, and we remain firmly on track to deliver our FY '27 guidance. With Q1 under our belt, that takes us to more than 400,000 ounces produced over the last 4 quarters. Importantly, ore produced from our own mines increased 7% this quarter. That lifted our ore stockpiles by 51% to 696,000 tonnes, roughly 6 weeks of mill feed. Those stockpiles kept our mills running through wet weather in the Murchison and provided ample ore feed when the mills emerged from their heavier maintenance schedule this quarter. At Beta Hunt, we hit a record 2 million tonne per annum annualized mining rate in September, with the new interim ventilation now commissioned. Aaron will take you through this in more detail later in the presentation. Our margins remain strong, an all-in sustaining cost margin of $3,117 per ounce delivered $292 million in mine operating cash flow and a $251 million underlying treasury build. We closed September with over $1 billion in cash, bullion and liquid investments, remaining debt-free and fully unhedged. It was also a big quarter for our future. We grew group ore reserves by 41% to 4.1 million ounces and set out a fully funded pathway towards 0.5 million ounces of production through our updated 3-year outlook. We continue to reward shareholders, declaring a $0.10 fully franked FY '26 dividend and also buying back $22 million worth of shares in Q1 FY '27. We also introduced a new shareholder capital returns policy. Our strategy is doing what it was designed to do, stronger production, driving stronger cash generation, which funds both our growth and ongoing returns to our shareholders. Slide 5. Q1 results firmly in line with guidance. Q1 has put us firmly on track for FY '27. We produced 98,400 ounces, broadly in line with the 98,900 ounces we delivered in Q4 and right on pace for our full year guidance of 385,000 to 425,000 ounces. Our all-in sustaining cost of $2,912 per ounce was below our guided range of $2,980 to $3,380 per ounce. That's despite a quarter with more planned mill maintenance across all our processing hubs and higher waste stripping in our open pits. We're investing in line with plan. Non-sustaining capital was $111 million against full year guidance of $450 million to $480 million going into development at Bluebird, Great Fingall and the Beta Hunt mines and into processing power, ventilation and camp infrastructure. Exploration was $24 million against guidance of $50 million to $75 million for the full year. Spend picked up in the quarter as planned drilling programs received their approvals and access, and we'll keep drilling. Slide 6. Westgold 4-5-6, fully funded growth. In September, we released our FY '27 guidance and an updated 3-year plan. The simplest way to describe it is Westgold 4-5-6. What does it mean? 4, 4 operating hubs across the Murchison and Southern Goldfields, with 5.7 million tonnes a year of installed processing capacity. That grows to more than 7 million tonnes a year by FY '29 through the Cue expansion this year and the Meekatharra expansion planned in FY '28. 5, a fully funded pathway to around 0.5 million ounces a year by FY '29. FY '27 sees Great Fingall reach commercial production and the Cue expansion come online. From there, production steps up to between 425,000 and 470,000 ounces in FY '28, reaching 460,000 to 510,000 ounces in FY '29, with our all-in sustaining costs falling at that point to between $2,640 and $3,000 per ounce as higher grades and throughput come through. We're funding the 4-5-6 plan from our own cash flow while continuing to return capital to shareholders in parallel. 6, Fletcher. It isn't included in the 3-year outlook, but with a 1.1 million ounce maiden reserve announced last year, it could add around 140,000 ounces a year on top of our production and gives us a very tangible pathway beyond 600,000 ounces a year for the group. Our Q1 result is the first step in delivering that plan. With that, I'll hand over to Aaron to take you through our operational results.

Thank you, Wayne, and good morning to everyone on the call. Our operations continued to build momentum in Q1. We mined 1.42 million tonnes of ore at 2.2 grams per tonne, up 7% on Q4, which was our strongest mining quarter of last year. That increase came from Great Fingall, Starlight, our Murchison Open Pit Program and Beta Hunt with overall mine grade lifting slightly quarter-on-quarter. Processing throughput was steady with mills fully utilized, processing 1.46 million tonnes of ore at 2.3 grams per tonne. Quarter-on-quarter upside at Lakewood was offset by usual Q1 heavy planned maintenance regimes across all of our processing hubs. The result was 98,400 ounces, in line with Q4, with production sourced from our own mines up 5%. That takes us to over 400,000 ounces over the last 12 months. The capability of this business is starting to show, and there is plenty more to come. Slide 9. Our stockpiles are building by design, creating resilience in our operations and derisking our planned incremental mill expansions that will support higher production at lower cost. Total ore stockpiles grew 51% to 696,000 tonnes, about 6 weeks of mill feed at our installed capacity. The build happened in both regions, the Murchison up 60% to 485,000 tonnes and the Southern Goldfields up 34% to 211,000 tonnes on the back of record mining at Beta Hunt. The resilience this creates was on show this quarter when wet weather closed haul roads in the Murchison over the period. Our mills kept running at full speed. Slide 10. Regionally, the Murchison produced 71,900 ounces, slightly below Q4. That reflects lower OPA production and increased planned maintenance at all 3 Murchison mills. Notably, production from our own ore sources in the Murchison was up around 4%. Across the Murchison hubs, Meekatharra delivered 35,900 ounces with a consistent feed grade of 2.5 grams per tonne. The mill ran at an annualized 1.9 million tonne run rate, still above its 1.8 million tonne annualized base capacity. Cue lifted to 19,000 ounces with grades slightly improving to 2 grams per tonne as more Great Fingall is introduced into the blend. And Fortnum continues to deliver to plan with around 17,000 ounces. In the Southern Goldfields, Higginsville produced 26,500 ounces, up on Q4. That includes the scheduled toll treatment parcel at Lakewood, partly offset by the major planned shutdown at the Higginsville mill. Slide 11. At Bluebird, mining ran at an annualized 870,000 tonnes, slightly below our 1 million tonne per annum target, with the mining schedule focused on smaller, higher-grade stopes, evident in the increased mine grade at 3.1 grams per tonne for the quarter. We continue to open additional mining areas, giving us multiple mining fronts, underpinning the improved mining rates and delivery of plus 1 million tonnes for the full FY '27. Bluebird is well positioned as the key feed for larger Meekatharra mill that will be delivered in FY '28. Slide 12. Earlier today, we released an update on Beta Hunt, and it's a milestone we're proud of. When we acquired Beta Hunt in August 2024, we saw a high-quality ore body held back by legacy infrastructure and a lack of drilling. Under prior ownership, it had not sustained mining rates above around 1.4 million tonnes per annum. Over the last 2 years, we've invested around $33 million to remove infrastructure constraints in ventilation, dewatering, water supply and power. We've also substantially improved mine design and significantly increased diamond drilling to bolster reserve and resource confidence. That work is paying off. In September, Beta Hunt delivered a record month at an annualized circa 2 million tonnes per annum. Our interim primary vent was commissioned during the quarter, ahead of the target we provided in Q4, and we are now targeting a sustained 2 million tonne a year mining rate from Q2 this year. Beta Hunt also delivered its second consecutive quarterly record, mining 423,000 tonnes in Q1. With those foundations in place, our focus shifts to optimizing cost and looking forward to firm up what is possible. Integrated Southern Goldfields expansion studies are underway and due next half, while we continue with 7 drill rigs growing the ore body. With that, I'll hand over to Tommy to take you through our financial results. Thank you.

Thank you, Aaron, and good morning, everyone. Slide 14. This slide shows the strength of our cash generation while we fund our growth. We sold just under 100,000 ounces in the quarter at a realized gold price of $6,029 an ounce, generating $602 million in gold sales revenue. We remain fully unhedged. The all-in sustaining cost increased to $2,912 an ounce, reflecting higher waste movement in our open pits, planned maintenance at our mills, annual labor increases and additional toll milling at Lakewood. Even so, our all-in sustaining cost margin of 3,117 an ounce generated $292 million in mine operating cash flows and $157 million in net mine cash flows after investing $111 million in non-sustaining capital and $24 million in exploration and resource development. We added $101 million to cash, bullion and investments during the quarter. We remain debt-free with around $1.6 billion of available liquidity, including our undrawn $600 million credit facility. Slide 15. Q1 delivered an underlying treasury build of $251 million before share buybacks of $20 million, growth and exploration spend of $135 million and proceeds from asset sales of $5 million. That's after we invested in building our ore stockpiles during the quarter and after $41 million of tax installment payments. In Q2, alongside our regular FY '27 tax installments, we'll pay the balance of our FY '26 income tax of approximately $180 million, with the tax return being finalized. Our closing treasury was $1.04 billion, up $101 million on June. This level of cash generation allows us to fund our growth internally while continuing to return capital to shareholders. Slide 16, which brings me to the shareholder returns. In FY '26, we returned $122 million to shareholders, comprising $27 million in buybacks and a $0.10 fully franked dividend totaling $95 million. The dividend was paid out to shareholders in early October. For FY '27, the Board has approved a $50 million on-market buyback, and we've already completed $22.3 million of this at an average of $5.46 per share. Under our revised shareholder capital returns policy, we've committed to a minimum return of $0.03 per share each year, including a minimum $0.02 dividend, an important point for shareholders. Under the policy, dividends are paid annually. The Board will determine the FY '27 dividend in August, after the finalization of our FY '27 financial year. So we won't be paying an interim dividend in February 2027. I'll hand back to Wayne to cover off on exploration and our closing remarks.

Thank you, Tommy. We continue to invest in the drill bit, $24 million in quarter 1 with 25 rigs operating at quarter end. In the Murchison, drilling at Bluebird is defining the extent of the system, while Cue and Paddy's Flat are testing new open pit sources that sit outside our current 3-year outlook. At Beta Hunt, 7 underground rigs are supporting near-term mining and continuing to define Fletcher. Greenfield programs are also underway. Some of our late targets at Higginsville were delayed by rain, and those programs will start as soon as practical. Long story short, in FY '27, we are investing between $50 million and $75 million in exploration and resource definition, focusing on reserve conversion. Last year, we converted reserves at $27 an ounce, and we won't be slowing down. That number speaks to the quality of the portfolio. In closing, Westgold is off to a strong start in FY '27. We are building a leading Australian gold producer. We delivered 387,000 ounces in FY '26 and 98,400 ounces this quarter, firmly on track for guidance. All of our assets are in Western Australia, a Tier 1 jurisdiction. We operate 4 processing hubs with capacity growing from 5.7 million tonnes per annum to more than 7 million tonnes a year by FY '29. We have a clear fully funded pathway to around 0.5 million ounces of production by FY '29, and with Fletcher, a tangible pathway beyond 600,000 ounces. Our assets are long life with ore reserves up 41% to 4.1 million ounces. Our balance sheet is strong with over $1 billion in cash, bullion investments, and we remain debt-free and unhedged. Most importantly, we are increasing returns to our shareholders, $122 million returned in FY '26 and a minimum $0.03 per share every year under our new policy. Last year, we effectively delivered 6x our minimum on that policy of that year. Slide 21. This slide compares Westgold with other ASX gold producers on a simple measure, enterprise value against consensus FY '27 earnings. On that measure, we traded around 3.3x towards the bottom of the group and at roughly half the peer median. Historically, the market has discounted Westgold for inconsistent delivery, operational risk and a business that was still being rebuilt. Some of that was fair at the time, but that's no longer the case. We've produced 402,000 ounces over the last 4 consecutive quarters. We've built 696,000 tonnes of ore stockpiles, which kept our mills running through wet weather this quarter. We generated $251 million underlying treasury build. We hold $1 billion in treasury, with no debt and no hedging. And we have a fully funded brownfield expansion path towards 0.5 million ounces of production a year backed by our 4.1 million ounces of ore reserves. There's a lot to like within Westgold. The reasons for that discount are being removed, but our valuation hasn't caught up. That gap is the opportunity in front of investors today. Slide 22. In closing, the time is now. FY '27 is another year where Westgold focuses on delivery, operational and financial delivery. We have derisked the delivery over several years and now have a sustainable business that can do 2 things. It can fund its own growth, and it can consistently return capital to its shareholders. That's a powerful combination and one that is not yet fully appreciated by the market. How have we derisked the business? We drilled. We added 1.5 million ounces before depletion to our reserve last year at $27 an ounce. We closed FY '26 with 4.1 million ounces of reserve. We invested capital ahead of production in our mines. At Great Fingall, Bluebird and Beta, mine outputs are lifting at each of these core underground operations. We are building stockpiles in front of each of our processing hubs. These buffer stocks ensure our mills can keep generating revenue even when it rains. We are focused on our largest assets now. And a point not well known is Westgold has 5 mines that have each produced greater than 1 million ounces. Five 1 million-ounce producers in 1 company, that's a rare combination. Anyway, I'd like to close today with thanking our team for their efforts in Q1. We are focused on delivery. And so from Westgold, I'll open the floor now to questions.

Thank you for all joining us today. Wayne here. I'll dive straight into the questions. First question from Kaan Peker from Petra. Bluebird, September production improved through higher grades rather than mining volumes. What specifically needs to change to lift mining above 1 million tonne per annum in December? And is the previously indicated 1.2 million tonne per annum run rate during FY '27 still achievable? I'll hand that to Aaron.

Thank you, Wayne, and thank you, Kaan, for the question. I'll draw your attention to Slide 11 of the deck in terms of what needs to happen to get us to the 1 million tonne run rate. Essentially, we're there. It's been about opening up mining areas and deconstraining the paste fill sequence. So we're there now and fully expect the mine to continue to lift and deliver the 1 million tonnes for the full financial year as expected.

Thanks, Aaron. Next question, again, from Kaan specific to Beta Hunt. With sustained 2 million tonne per annum mining targeted from this quarter, how much can be processed through Higginsville and tolling arrangements in FY '27?

Yes. Thank you again, Kaan. So the existing processing capacity, inclusive of our Lakewood contract, is about 1.7 million tonnes for the year. So with Beta Hunt delivering and Two Boys, we expect a stockpile build of approximately 500,000 tonnes for the year. And gold production will be as expected at around the 115,000 ounces as put in our guidance.

Thanks again, Aaron. Next question from [ Peter Bryant ]. Peter asked the question. Future takeover opportunities, question mark. Thanks for that, Peter. I'll take that one. We're very much focused on organic growth. I mean takeovers really with growth in these businesses, you only have 2 options. You either buy growth or you build it. In FY '27, FY '28 and FY '29, under the 4-5-6 strategy, we're very much focused on organic growth from the things we already own. Next question from [ Paul ]. Paul asks, what are our drill rigs up to lately? Any results coming? Are you looking for more open pits on the Higginsville property? And he asks a question about is diesel fuel a concern? I'll ask -- answer the question about the drill rigs. Any results coming soon? 100%. Are you looking for more open pits on the Higginsville property? The actual -- we are, I mean -- and again, the greenfields exploration at Higginsville is really focused on open pit material. A lot of that drilling got paused during Q1 because of rain. And the one rig that you see running at Higginsville at the moment is drilling underground extensions at our operating Two Boys mine. I'll hand the question over to diesel -- about diesel to Aaron.

So in short, no, we've invested in increasing storage capacity in diesel as well as our investment in gas solar hybrid power for our operating mines over the last few years. So we feel the business is in a really resilient sort of position in terms of diesel.

Thanks, Aaron. Next question is from Al Harvey of UBS. And Al asks, ability to access Fletcher and Mason from overlying Goldfields ground at St Ives. Let me talk about that. Fletcher and Mason, Fletcher is obviously we're continuing to drill, and we're now starting to drill the Mason target within Beta Hunt. Studies are running now in terms of a haulage, what are the best haulage scenarios to get not 2 million tonnes of Beta Hunt to the surface, which we're currently doing, but 4 million tonnes. So yes, we will focus on multiple options, including basically truck haulage back out through a new portal, which we would build within our existing access. Second part of that question from Al, is Southern Goldfields stockpile build? Will you keep these on site at Beta Hunt or truck to Higginsville? I'll handle -- hand this to Aaron.

In short, Al, that will be staying at Beta. We have the space and are doing the work at the moment, and we will be able to store well over 1 million tonnes at Beta Hunt, and leaving the dirt there gives us the most optionality, considering where we're looking at building the bigger mill.

Thanks, Aaron. Next question from Ganesh. Ganesh states, Wayne and team, excellent execution of plan. Safety record and focus is commendable. When are decisions regarding Southern Mill expected? I'll hand that one to Aaron.

Yes, I'll take that one. So we've got integrated studies for a circa 4 million tonne mine and mill at Beta Hunt, with a mill going closer to Beta Hunt at the moment. We're expecting completion of those studies in H2, later in H2, waiting on the -- we need that information to be able to get towards decision dates. So the market will hear more about that as those studies progress.