Westgold Resources reports a sharp revenue increase driven by higher gold prices and the Karora acquisition, yet posts a net loss for the half-year ending December 2024. The company also declares a fully franked dividend amid rising costs.
- Revenue jumps 72% to $624 million following Karora acquisition and gold price surge
- Net loss of $27.6 million despite increased cash inflows from operations
- Gold production rises 29% to 158,255 ounces
- All-in sustaining costs per ounce increase by $468 to $2,562
- Fully franked dividend of 1.25 cents per share declared and paid
Strong Revenue Growth Amid Strategic Acquisition
Westgold Resources Limited has unveiled its half-year financial results for the period ending 31 December 2024, highlighting a significant revenue boost to $624 million. This surge is primarily attributed to the acquisition of Karora Resources Inc., effective 1 August 2024, which added five months of gold sales from the Southern Goldfields region. Additionally, a higher average gold price of $3,910 per ounce, up from $2,963 in the prior comparable period, further bolstered top-line performance.
The acquisition has effectively transformed Westgold into a larger, more diversified gold producer, reflected in a 29% increase in gold production to 158,255 ounces. This expansion positions the company to leverage economies of scale and access new operational assets, although it also introduces integration challenges and cost pressures.
Profitability Challenges and Rising Costs
Despite the revenue growth, Westgold reported a net loss attributable to members of $27.6 million, a stark reversal from the $10.3 million profit recorded in the previous corresponding period. This loss contrasts with a positive cash inflow from operating activities of $125 million, indicating that non-cash items and acquisition-related expenses weighed heavily on the bottom line.
Cost of sales increased substantially to nearly $498 million, reflecting the expanded operational footprint and higher production volumes. The all-in sustaining cost (AISC) per ounce climbed by $468 to $2,562, driven by lower-than-expected output from key mines such as Bluebird-South Junction and Beta Hunt, combined with the operational costs of the newly acquired Southern Goldfields assets.
Balance Sheet and Dividend Highlights
Westgold’s balance sheet shows a robust asset base of approximately $2.95 billion, up 189% year-on-year, largely due to the Karora acquisition. Liabilities also rose but at a lower rate, resulting in net assets of $1.91 billion. Cash and cash equivalents decreased to $123 million, reflecting cash outflows related to the acquisition, partially offset by strong operational cash flows.
In a move that underscores management’s confidence, Westgold declared and paid a fully franked dividend of 1.25 cents per share during the period. This dividend payout signals a commitment to shareholder returns despite the net loss, suggesting an expectation of future profitability improvements as integration progresses.
Looking Ahead: Integration and Market Dynamics
The acquisition of Karora marks a pivotal moment for Westgold, expanding its operational scale and geographic reach. However, the near-term financial results reveal the complexities of integrating new assets and managing cost structures amid volatile gold prices and production challenges. Investors will be watching closely how the company navigates these headwinds and capitalizes on its enhanced portfolio.
With gold prices remaining a critical factor, Westgold’s ability to control costs and ramp up production will be key to returning to profitability. The declared dividend provides some reassurance, but the net loss highlights risks that warrant careful monitoring.
Bottom Line?
Westgold’s bold expansion boosts revenue but underscores the challenge of turning scale into sustained profit.
Questions in the middle?
- How will Westgold manage rising all-in sustaining costs amid production shortfalls?
- What synergies and cost savings can be expected from the Karora acquisition integration?
- Will gold price volatility continue to impact Westgold’s path back to profitability?