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Westgold rained out

Wet weather across much of WA in the first three months of the year has forced Westgold Resources (ASX:WGX) to cut its full year financial year 2024 production guidance by more than 10 per cent until it sorts out the impacts on mining and output of the repeated bouts of rain and wet roads.

Westgold is one of a growing number of miners to have revealed the impact that wet weather across WA — especially in January and March — has had on operations.

Gold Road Resources (ASX:GOR) on Tuesday (and its South African partner, Gold Fields) revealed the Gruyere mine had been hit hard and lost thousands of ounces of production in the quarter, with the impact of rain even on March 28 spilling over into April.

Wednesday, Westgold said because of problems at one mine and the inclement weather, it had cut its June 30 guidance to 220,000 to 230,000 ounces at an all-in sustaining cost of $2100 to $2300 an ounce.

That was after March quarter gold production fell nearly 14 per cent to around 52,100 ounces from 60,512 ounces produced in the March 2023 quarter. The average price of $3,137 was up sharply on a year ago and on the December half year figure $3,041 an ounce.

The previous full year guidance was 245,000 to 265,000 ounces after the company produced 124,343 ounces in the December half at an AISC of $2,093 an ounce.

The reaction from investors was the usual knee jerk “sell”, and down went the shares by more than 13 per cent at one stage, without much consideration to the detail in the report and the fact that the cut to production will probably be offset by the surging gold price, which in Australian dollars is well over $3,400 an ounce — around 10 per cent more than what Westgold received in the third quarter.

Despite a pause at its Meekatharra operation and the wet weather conditions impacting production, the company saw a $9 million increase in cash and bullion during the quarter, taking the total to $247 million by March 31. That was solely due to the much higher gold price — especially in Australian dollars.

Westgold CEO Wayne Bramwell said in Wednesday’s statement that “We remain focussed on recovering lost ounces in FY24 but remain unremorseful in pausing mines that cannot deliver the returns our shareholders expect.”

“The operational and weather issues encountered during Q3 increase pressure to prematurely commence mining at the Great Fingall mine in Q4, FY24 but rushing the mining execution without the requisite data escalates operational risk and cost.

“This is not our preferred operating model and as such, Westgold will systematically complete its evaluation on the early mining of shallow flat structures at Great Fingall with a view to commence mining in Q1, FY25.

“Positively, our Starlight mine continues to exceed expectations, our drilling at Bluebird-South Junction continues to expand the mine footprint and with 12 drills operating we continue to focus on reserve growth across our portfolio of assets,” he said.

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