Merger lessons spark Westgold’s new ‘co-opertition’ approach

The West Australian05-27 18:00

The challenging experience of integrating the assets of Karora Resources since 2024 has significantly altered the attitude of WA gold miner Westgold Resources to mergers and acquisitions, prompting a ...

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boss Wayne Bramwell dubs “co-opertition” — at a time when consolidation of the gold sector continues at pace.The latest big deal is Goldfields-focused producers Regis Resources and Vault Minerals putting forward a $10.7 billion proposal, with Vault the result of an earlier coming together of Silver Lake Resources and Red 5.Westgold absorbed Canadian miner Karora and its Beta Hunt mine and Higginsville mines and processing plant — as well as the since-offloaded for $85 million Lakewood mill south-east of Kalgoorlie-Boulder — in a $2.5b deal about the same time as the Silver Lake-Red 5 merger,But it turned out to not be a smooth process.Camera IconWestgold Resources managing director and chief executive Wayne Bramwell. Credit: Tony McDonough/SuppliedWestgold set production guidance of 400,000 ounces to 420,000oz for the 2025 financial year but ended up producing only 326,834oz.Output for the 2026 financial year is forecast to be 345,000oz-385,000oz — it has produced 288,500oz so far this financial year — and the company has signalled it wants to churn out 470,000oz of gold from the 2028 financial year.Westgold managing director and chief executive Mr Bramwell told Celebration of Mining the merger had been more complicated than anticipated, and that had influenced the company’s thinking on how to advance growth and cash-generating opportunities.“Personally, I was overly optimistic about how quickly we could put these two companies together and what it would take to start to deliver the benefits of expanded business,” he said.“But that was more about my optimism than anything about the quality of the assets we bought.“Has it done everything that we wanted it to do? Pretty much.“I mean, there’s no buyer’s remorse about the merger. What we bought was a very good ore body with very bad infrastructure.“And really, my optimism was how quickly it would take us to fix the infrastructure, which has taken longer, so nothing wrong with the ore body — it’s just our ability to execute as fast as I would have liked wasn’t there.”Camera IconA truck exits the west portal of the Beta Hunt gold mine near Kambalda. Credit: Tony McDonough/SuppliedMr Bramwell said this had changed his view on “that type of transaction”.“There were some things we did really well in terms of integrating the two teams, and there were things we should have done faster,” he said.“So if we were to do it again, I’d certainly take a different view about how long it would take to put two companies of about the same scale together, and would take a different approach about how you physically integrate the two teams.“Because in the past . . . I’ve been involved in a previous life where a company has bought another company and their version of integration was, ‘Here’s your new shirt, play on’.“That’s not what the Karora-Westgold thing was, and I thought we were far more considered in terms of putting the two teams together, and there were things we did probably too fast and there were things we did too slow.”Mr Bramwell said Westgold had since become focused on simplifying its portfolio.“Westgold’s got this massive list of assets, some of which are really big and some are small, and we went through a process of over a year of trying to rank all these things,” he said.“What it told us was the best bang for the buck and the best return to the shareholders is for us to focus on the bigger assets.“We had all these other smaller assets which were all individually valuable but . . . that value was not being recognised by the shareholders or the market.“So, the idea was . . . the things that are not in our five to 10-year plan, let’s give them a life.“Some of the assets we’ve sold would probably rank 16 and 17, so they were never going to be able to compete for capital with the things which ranked one or two.“But by selling some of these assets to a little company and giving them funding and a new team, they become the number one and two assets in a small company, and then have the ability to go into production.“We did that with Valiant, we’ve done that with Great Boulder (Resources), we’ve done . . . a different corporate deal with New Murchison (Gold), which saw that little exploration company become a producer.“So, I just think it’s smart business.“I just don’t see the value in leaving gold in the ground in the current gold market when, if we put it in the hands of a different group, that gold probably comes out of the ground and Westgold shareholders become the beneficiary.”Camera IconWestgold Resources’ Tuckabianna Mill in the Murchison. Credit: Tony McDonough/SuppliedMr Bramwell said this approach was better than a full takeover of a company such as New Murchison Gold.“We speak to this . . . ‘co-opertition’ — all of our companies large and small compete for labour and talent and investment, but there are some things I just don’t think we need to compete on,” he said.“We’ve got all this capital in the business across the Murchison and the southern Goldfields, and I think it’s far smarter business to try and co-operate with people like New Murchison who had a good ore body but no processing solution.“We gave them a processing solution which then changed that company from explorer to producer, and effectively generated a new gold producer in Australia at a time when we’re losing all these other companies through M&A.“Vault and Regis come together, that removes Vault from the ASX, so we lose a producer.“In the last 12 months, we’ve lost Spartan — they were explorers — we lost Gold Road — they were a producer — we lost De Grey, which were explorers.“At the top end you’ve seen this M&A. I think Westgold single-handedly is working hard at the bottom end to try and replace the companies that were losing at the top.Mr Bramwell said another example of this was the spin-out of Valiant Gold with the South Emu-Triton and Comet underground mines, which are near Westgold’s Meekatharra and Cue processing hubs, and which Westgold had placed on care and maintenance in 2022.An initial public offering in March raised $75m, with Westgold retaining a 44 per cent shareholding post-listing.“Those two underground mines that we closed two years ago, we would never have got to in the next five years,” Mr Bramwell said.“But now Valiant’s got its own management team and funding (there’s) every probability in the next 12-24 months Valiant becomes a producer.“I think it’s good for the industry to have new gold producers being created because we’re losing them at the top or they’re getting knocked off before they even become a producer.”Camera IconUnderground at Westgold Resources’ Beta Hunt gold mine near Kambalda. Credit: Tony McDonough/SuppliedHe said investors and analysts were responsive to a market where new investments were being created.“In a market where there’s a lot of interest in gold, the actual ecosystem of investable things (is) shrinking, so to bring new product to market, I think a lot of the analysts and investors like (that),” Mr Bramwell said.“They may be older assets, or smaller assets, but . . . small fish can be sweet.”Mr Bramwell said Westgold had been specific about which assets it wanted to divest.“We told the market . . . Peak Hill, Mt Henry-Selene, and Chalice were things . . . we’d identified as being under-scaled for us and non-core . . . plus the Comet (and) South Emu-Triton undergrounds . . . so we were very clear about the things we were going to bring to market.“We’ve brought all of them to market now except Chalice, which hopefully will be done (by the end of May).”The corporate deals involving Valiant and the sale of Mt Henry-Selene near Norseman to Alicanto Minerals last December unlocked $140m of immediate value, while retaining exposure to future upside through strategic equity shareholdings.Camera IconThe core yard at Westgold Resources’ Beta Hunt gold mine near Kambalda. Credit: Tony McDonough/SuppliedHowever, Mr Bramwell said the broader M&A environment meant Westgold could not rule out being the target of a bigger competitor.“What catalyses that type of conversation? Well, two things,” he said.“The person picking up the phone and going, ‘Hey’, their strategy may be getting driven by the fact that they’ve not invested in drilling and that they need growth, and they can see within Westgold that we’ve been drilling for four to five years, we’ve now got productive mines, the business is profitable, so they may go, ‘OK, we really like what you’re doing now, we can see the growth trajectory of Westgold’, and if they don’t have a similar or comparative growth trajectory, that may be driving their strategy.“Maybe there’s a bit of Vault and Regis there . . . they’re big companies by themselves, but putting those two companies together, clearly in all the press, there’s been discussion where there’s no technical synergies, it’s really more commercial.”Mr Bramwell said there were many companies which might be looking at Westgold from an exploration growth perspective.“Some of those more difficult years in gold would have meant that things like exploration was not getting the capital that it needed,” he said.“Westgold was testament to that — for the first seven years (we) didn’t have the financial resources to drill and explore (our) ore bodies.“Well, that changed three years ago and we are now three years post-significant capital investment, which has really changed our business completely.“We’ve now got on average a seven-year mine life in every asset we operate, and moving from a mine-constrained to a mill-constrained scenario. We’ve actually created that by actually drilling these ore bodies.”Camera IconA miner underground at Westgold Resources' Beta Hunt gold mine near Kambalda. Credit: Tony McDonough/Supplied/SuppliedAs Westgold has been pursuing this strategy it has enjoyed the benefits of the sky-high gold price, reporting cash, bullion and liquid investments of $856m at March 31, representing a build of $202m during the quarter.The company said its underlying cash build was $285m before one-off payments, growth and exploration spend, and one-off cash inflows.Its share price on May 15 was $5.29, more than $2 up on the $2.26 it had slumped to when announcing the FY25 production downgrade on February 3 last year.This gave it a market capitalisation on that day of just under $5b.This growth saw Westgold enter the ASX 100 during the March quarter, with Mr Bramwell at the time saying it reflected the growing scale, quality and resilience of the business, and the continued efforts of the company’s people to build it.The company employs 2632 people, both directly and as contractors.“We’re proudly West Australian,” Mr Bramwell said. “For us, Kambalda feels very much like Meekatharra . . . it’s a bit of an under-loved address.“We love both of them now. We’re quietly committing time and capital to both the assets and the community and rebuilding the brand in some sense.“Post-this merger with Regis and Vault, we’ll be the fourth-largest Aussie gold producer.“Some people don’t get that, and that’s fine. We’re not standing on a box blowing our trumpet. We need to earn our stripes in this game and after 10 years, we’re still earning our stripes.“There’s still lots we can do, but very much focused on investing in the right things and becoming an ASX 50 company eventually.“Under-promise, over-deliver, show that we’re . . . prepared to work with other people and good people and put our money where our mouth is . . . we’re invested in (these little companies) because . . . we think they’ve got a skill set we don’t or they’ve got good assets, and if we can help them along for the benefit of our shareholders as well and theirs, well, that’s win-win.“So that’s that co-opertition thing whereby we don’t have to own everything and do everything to be successful.”The Celebration of Mining special publication is inside the Kalgoorlie Miner’s Thursday May 28 edition.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.42.2","shortVersion":"4.42.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2638680669","isCrawlerRequest":true}