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Investing.com - Goldman Sachs has initiated coverage on Westgold Resources Ltd (ASX:WGX) with a Buy rating and a price target of AUD3.50, implying approximately 23% upside potential.
The Western Australian gold producer completed the acquisition of Canadian-listed Karora Resources in August 2024 for approximately AUD1.4 billion through a combination of cash and shares. Westgold now operates two core assets in Western Australia: the Murchison operations producing 200-300,000 ounces per annum and the Southern Goldfields operations acquired from Karora.
The Murchison operations consist of approximately 4-7 underground mines and one open pit that feed three mills, two of which have plans for increased utilization or expansion. The Southern Goldfields operations include two underground mines and approximately two open pits that feed the Higginsville mill, which is set for expansion following the recent divestment of the Lakewood mill.
Goldman Sachs expects near to medium-term grade and throughput improvements to offset elevated underlying cost components resulting from the amalgamation of smaller mine and milling infrastructure. The investment bank notes that Westgold has an existing reserve life of approximately 10 years.
The stock currently trades at a discount to peers despite having elevated sensitivity to rising gold prices, according to Goldman Sachs analyst Hugo Nicolaci.
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