On Friday, RBC Capital Markets adjusted its outlook on Westgold Resources Ltd (WGX:AU) stock, increasing the price target to AUD3.50 from the previous AUD3.20. The firm maintained its Outperform rating for the mining company. The revision follows Westgold's recent operational performance and future prospects.
The analyst noted that Westgold experienced a decline in grades due to the heavy draw on stockpiles, resulting in the group's All-In Sustaining Costs (AISC) being higher than expected. The costs were 8% and 7% above RBC Capital's estimates and the consensus, respectively.
Despite this, the firm anticipates that production targets of 1.2 million tonnes per annum (Mtpa) at Bluebird and 2Mtpa at Beta Hunt will be reached in the fourth quarter of the fiscal year 2025. This expectation is underpinned by developments at the Polar Star and Fletcher Zone.
There is also a potential mill expansion at Higginsville being considered, which would increase capacity to 2.5Mtpa to accommodate the increased tonnage from Beta Hunt. This expansion could further incentivize new open-pit opportunities in the Southern Goldfields region, particularly following the closure of the Pioneer mine.
Looking beyond the fiscal year 2025, RBC Capital projects that Westgold will see an increase in production and a decrease in growth capital expenditures, leading to an improvement in free cash flow (FCF). The firm expects the FCF yields for Westgold to be 6% in FY25 and 12% in FY26.
The analyst concluded with a positive outlook, stating, "Our rounded price target lifts to A$3.50/share. Remain Outperform." This statement reflects confidence in Westgold Resources' ability to achieve its production targets and enhance shareholder value in the coming years.
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