Westgold Resources Plunges On Fund Raising Placement & Lithium Sell Off

As reported on 7th December 2018, Westgold Resources Limited (ASX: WGX), Australian leading gold producer, announced the share placement of $23.4 million, by issuing 26 million new shares at AUD 0.90 per share. The private placement is undertaken to finance acquisition of key underground mining contractor, Australian Contract Mining Pty Ltd.

Westgold has paid Australian Contract Mining, nation’s one of the largest underground mining contractor, $2.5 million in cash and 14 million fully-paid ordinary shares. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

The acquisition comes after Westgold’s successful commissioning of its fourth gold operation. The company now aims at focussing on lowering mining cost, contractor margin and efficient gold projects.

In addition, the minerals explorer has also expressed the intention to divest and sell its lithium royalties at Mt Marion and Buldania for $15 million to SilverStream SEZC, minerals company based in Cayman Islands. The deal involves a 75 days due-dilligence and royalty documentation period. Post this cool off period, Westgold will receive $7.5 million in cash on immediate basis and two further tranches of $3.75 million in cash/shares.

The royalties sell off strategy is aimed at separating non-core assets and company will continue to own its other lithium assets such as lithium mining and exploration rights in Hampton.

Westgold, a major player in Australian gold sector, operates four production facilities in prolific gold belts in Western Australia. Its three operating projects are Higginsville Gold Operation , South Kalgoorlie Operations, Central Murchison Gold Project and one under refurbishment. It is to be noted that Western Australia region controls 68% of Australia’s gold production.

Westgold is currently the 6th largest domestic gold producer in Australia, currently producing approximately 275,000oz per annum of gold, the company expects production expanding to over 350,000oz per annum upon emerging from major capital investment phases. Steady state production of all operations is expected in the 2020 financial year. Westgold lately added about $20.85 million to the kitty of its working capital and the hedge book has been worked around with a good expansion of Gold Pre-Pay Addition. The group had otherwise reported for gold output of 64,037O z in the latest quarterly update. Its gold operations were seen to have yielded un-audited EBITDA of about $12m. The key aspect to note was steady output from Meekatharra Operations.

As on 5th December 2018, Westgold’s securities were put on trading halt on ASX on grounds of its pending fund-raising private placement announcement. Shares opened at $1.010 at ASX earlier today but plunged 13.9% to $0.895. Westgold’s stock has witnessed a drastic fall of around 39% with $1.720 price at 2018 beginning. However, its stock holds a positive outlook in near future with company’s long run strategy of owning multiple high-quality significant gold production projects.

Since the private share placement is undertaken to finance key business expansion, stock is expected to benefit in long term. Also, its gold projects demonstrate excellent growth trajectory. WGX has a market capitalisation of $ 377.63 million and the earnings per share is around -0.003 AUD.


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