Westgold Resources Limited 

WGX Details

Changes in Board: Westgold Resources Limited (ASX: WGX) is a mineral exploration company that operates in gold assets in Western Australia. WGX has recently announced the appointment of Mr. Peter Cook as a Non-executive Chairman and Mr. Wayne Bramwell as Executive Director from 1 August 2021.

Q4FY21 and FY21 Highlights:

• The company reported gold production of 56,909oz and revenue of $128 million in Q4FY21. The total FY21 production stood at 245,411 oz, impacted by labour shortages and lower overall grade milled.
• All-in Sustaining Costs (AISC) for the June 2021 quarter stood at A$1,523/oz, which is within the guidance of A$1,500 – A$1550/oz.
• WGX closed the June 2021 quarter with 156,000oz hedged at an average A$2,133/oz.
• At the end of the June 2021 quarter, the company had cash and liquid assets of $157 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company’s production could be impacted due to a shortfall in labour availability during the COVID-19.
• Fluctuations in Gold Prices: The company is exposed to the risks related to the fluctuations in the prices of gold as it could impact its financials.

Outlook: Looking head, the company is focused on cost optimisation to build financial strength and fund organic and regional growth aspirations. For FY22, the company expects its gold production to be around 270,000 oz with AISC between A$1,500 – 1,700/oz.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Recently, the company has commenced its operational activity on its Bluebird underground mine at Meekatharra, which was suspended due to COVID-19 labour issues earlier in the year. Further, its stope mining has also commenced within the Triton North area of the South Emu-Triton underground mine at the Meekatharra Gold Operations. The stock of WGX is trading below its average 52-weeks' levels of $1.645-$2.980. The stock of WGX gave a positive return of ~2.059% in the past one week and a negative return of ~24.55% in the past one year. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average EV/Sales (NTM trading multiple), considering the uncertainty over COVID-19 impact and labour shortages. For the purpose of valuation, peers such as Resolute Mining Ltd (ASX: RSG), Regis Resources Ltd (ASX: RRL), St Barbara Ltd (ASX: SBM) have been considered. Considering the current trading levels, indicative upside in valuation, healthy balance sheet, commencement of operational activity at Bluebird underground mine, decent cost performance in June 2021 quarter, and optimistic outlook, we recommend a ‘Buy’ rating on the stock at the market price of $1.700, as on 18 August 2021, 10:40 AM (GMT+10), Sydney, Eastern Australia.

WGX Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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