Westgold Upgrades Gold Hedge Book

  • Jan 08, 2019 AEDT
  • Team Kalkine
Westgold Upgrades Gold Hedge Book

On 8 January 2019, Australia’s leading gold producer, Westgold Resources Limited (ASX: WGX) announced about expanding and upgrading its gold hedge book, using the recent strength in Australian Dollar gold price. The revised hedge book totals 150K ounces and is structured as a fixed forward delivery of 10K ounces per month at a price of $1,776.10 per ounce for one year three months.

In addition, Westgold will be fulfilling its gold pre-pay commitment with Citibank to repay 22,591 ounces at an average received price of $1640.78 per ounce repayable at approximately 1,250 ounces per month over the next one and half years, effective January 2019. The company has already secured the funds for these sales and will begin the delivery this month.

Westgold operates high-grade, world-class production facilities in resourceful gold belts in Western Australia, contributing around 68% of nation’s gold output. Its projects include Higginsville Gold Operation, South Kalgoorlie Operations, Central Murchison Gold Project and recently started Cue Gold Operations. On 24 December 2018, Westgold announced signing an agreement for buying Andy Well and Gnaweeda Gold Projects for $15 million from Doray Minerals.

On 7 December 2018, Westgold announced its intention to sell off lithium royalties in line with its strategy of demerging its non-core lithium business. The company signed a Letter of Intent with SilverStream SEZ to divest its lithium royalties at Mt Marion and Buldania for AUD 15 million. SilverStream was expected to pay AUD7.5 million in immediate cash and two further tranches of AUD 3.75 million in cash/shares, at the end of 75-day due diligence and documentation period. On 31 December 2018, Westgold announced accepting a superior lithium royalties sale offer from Cobalt 27 Capital Corp for a total consideration of AUD 250K and 200 metric tonnes of physical cobalt metal. The company decided to choose this offer over SilverStream, considering high current cobalt price at $54,500 per tonne.

Westgold invested substantial capital across several gold operations during the past year. The company invested $92.4 million in CMGP (Meekatharra and Cue Gold Operations), $25.1 million in Higginsville Gold Operation and $ 32.1 million in Fortnum Gold Project. The exploration expenditure for the company stood at $25.4 million for 2018 financial year. During the year, the company reduced its gold prepayment obligation by delivering 15000 ounces of gold at an average price of AUD 1593 per ounce.

During 2018, Westgold’s key Big Bell mine’s two-year dewatering and restoration program approached near completion stage. The company sold off its South Kalgoorlie operations and utilized the sourced funds to strengthen its Murchison Region operations. It successfully acquired and merged Australian Contract Mining Pty Ltd, the major underground mining contractor.

Westgold reported a 21% rise in group’s revenue to $372 million. The After-Tax Operating Loss stood at $1.2 million for the company. Operating cash flow of $14.7 million was declared. Despite the same of South Kalgoorlie operations, group’s Net Assets grew by 35.4% to $405.8 million.

The price of the scrip is trending down from the past one year falling by almost 49% (AUD 1.765 on 8 January 2018). The shares traded flat today, closing the session at AUD 0.900, with a market capitalization of AUD 350.2 million.


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