Australian gold explorer, Westgold Resources Ltd (ASX: WGX) made an announcement on 24 December 2018 stating that it has signed a binding term sheet with Doray Minerals Limited to buy its Andy Well and Gnaweeda Gold Projects collectively for $15 million in cash and shares. Following this news, the share price of the company increased by 0.602 percent as on 24 December 2018.
From a total consideration of $15 million, Westgold will pay Doray $2.5 million in cash and $6.5 million in shares at completion which is scheduled to occur on or about February 15, 2019. Doray Minerals Limited has voluntarily agreed to a 12 month on escrow on its $6.5m in Westgold shares, and Westgold is also planning to make bonus payments to Doray from future production from the projects. Westgold is going to make its initial bonus payment of $2 million cash after production of 100,000 oz from the projects, and then it will pay $2 million two more time when the production reaches 250,000 oz and 500,000 oz respectively.
The completion of this sale transaction is subject to the satisfactory completion of due diligence by Westgold and the transfer of any tenements comprising the Gold Projects currently held by Doray to Andy Well Mining Pty Ltd. Further, the sale transaction is subject to the receipt of any necessary third-party consents.
It is expected that both the projects (The Andy Well and Gnaweeda Gold Projects) will provide Westgold opportunities for future mining for both high-grade underground ore and bulk oxide open pit ores, respectively. As the projects are located just 50 km up the Great Northern Highway from the Bluebird Processing Hub, they have an advantage of leveraging off a larger and lower cost production base.
Recently, Westgold completed a share placement of 26mn fully paid ordinary shares at A$0.90 per share to raise a total of A$23.4mn. This placement replenished the working capital applied by the company for the purchase and re-build of Australian Contract Mining Pty Ltd. Further, the company also entered into a conditional letter of intent for the divestment of its non-core lithium royalties at Mt Marion and Buldania for a headline sale price of A$15mn to SilverStream SEZC.
Westgold’s September Quarter gold output was steady at 64,037 ounces of which 61,037 ounces was directly attributable to Westgold’s operations. In the September quarter, the company earned EBITDA (unaudited) of $11.9mn reported a cash cost (C1) of A$1,406/oz.
In FY 2018, the company earned revenue of $372 million which is 21 percent higher than FY 2017. The Net assets of the company grew by 35.4 percent to $405.8 million in FY 2018. At the end of FY18, the company was having Cash and cash equivalents of $75.4 million which was $67.1 million in FY 2017.
In the last six months, the share price of the company decreased by 52.71 percent as on 21 December 2018. WGX’s shares traded at $0.835 with a market capitalization of circa $322.96 million as on 24 December 2018.