Monsters of Rock: Westgold, West African, Western Bulldogs - it is a good week for sons of the west

Miners plunge into red as lithium and iron ore stocks tank
Gold stocks bucked the trend, up 1.62% across the All Ords sub-index and more than 26% so far this year
Westgold and West African report decent quarterly results

Lithium and iron ore are leading the ASX materials sector on the dance of death today, with a horror quarterly from Mineral Resources (ASX:MIN) doing little to help matters.

At 4.30pm AEST the materials sector, composed largely of the ASX’s mining monsters — today monstrosities — was down around 0.71%.

Iron ore, paying more than US$130/t not too long ago, is only a touch above US$100/t after the China Iron and Steel Association told steel mills losing money to shut up shop and curb production.

That’ll do it. BHP (ASX:BHP) alone makes up more than 10% of the ASX 200, with Rio Tinto (ASX:RIO) and Fortescue Metals Group (ASX:FMG) also making up a sizeable chunk.

In times like these solace can often be found in the gold sector, where producers are starting to turn a corner in what has been a decent enough reporting season so far.

With prices again sidling up cozily to the US$2000/oz mark, ASX gold stocks were on a run today with the ASX All Ords gold sub-index up 1.92% for a more than 26% YTD lift. Tasty.

Good day to report if you’re a gold miner.

Westgold shooting for upper end of guidance

Two of those lucky parties were Westgold Resources (ASX:WGX) and West African Resources (ASX:WAF), who taking a cue from their namesake Western Bulldogs and their merciless mauling of the Fremantle Dockers, are enjoying a decent week.

(We’ll waste few inches on the embarrassment that is their other AFL namesake.)

Westgold has been a classic rebound play this year.

A 2023 pick for a number of gold bull mining analysts, including Argonaut head of fund management David Franklyn, Westgold is up a handy 66.11% YTD and having gone from Monster to Mouse in 2022 is back in Monster territory in 2023 at a market cap of over $700 million.

Despite the positivity around the stock, MD Wayne Bramwell told investors on a webcast today they were “early in the turnaround of this company”, pegging the focus on safe and profitable ounces.

The numbers from March make for decent if not spectacular reading. Cash was up $9m to $168m with positive mine operating cashflow of $32m as 60,512oz left its network of gold mines in WA’s Mid West at all in sustaining costs of $2094/oz.

With 188,740oz produced this financial year so far, WGX is tracking towards the top end of its guidance of 240,000-260,000oz and said today it plans to hit the mid-point of its $1900-2100/oz cost guidance with costs through the first nine months of $2077/oz.

It came amid a major rainfall event across its Murchison mines, where MD Wayne Bramwell described efforts to keep the operation running as “herculean”, saying ounces were “not lost but effectively deferred”.

WGX had just 40,000oz of hedges left as of March 31, with a falling hedge position providing more exposure to near record gold prices.

Westgold Resources (ASX:WGX) share price today:

WAF production up 13% in March

From West Australia to West Africa, where WAF saw production lift 13% QoQ to 56,307oz in the March term, with costs down 10% to US$1172/oz.

That came against 48,208oz of unhedged gold sales at an average price of US$1878/oz, generating $29m of operating cashflow after a $25m 2021 income tax payment.

WAF expects to deliver 210,000-230,000oz at AISC of US$1175/oz this calendar year, while pushing ahead with the construction of its Kiaka gold mine, where it spent $39m on early capex in March.

Production is expected to average more than 200,000ozpa in 2023 and 2024 before lifting to more than 400,000ozpa from 2025 once the Kiaka mine is online to complement its Sanbrado operation in Burkina Faso.

“I’m pleased to report gold production increased 13% in the March quarter, while driving our all-in sustaining
cost down. We continue to benefit from rising gold prices as an unhedged gold producer, bolstering our cash
and bullion on hand, while investing in our growth,” WAF executive chairman Richard Hyde said.

“WAF’s 100% unhedged Mineral Resources and Ore Reserves now stand at 12.6 million ounces and 6.4 million ounces of gold, respectively, following successful exploration drilling and feasibility programs in 2022. We advanced our 7.7Moz Kiaka Gold Project, investing A$39m on construction activities and progress payments for major equipment.

“Kiaka development remains on budget and schedule to pour first gold in the second half of 2025.

“We are aiming to fund Kiaka with cashflow and debt and look forward to announcing a syndicated debt facility to fully-fund Kiaka in Q2. Kiaka will be a long-life low-cost gold project averaging 219,000oz of gold production per annum for 18.5 years at AISC of US$1,052/oz.”