Why Westgold Resources Ltd is trading flat despite a production downgrade

The Westgold Resources Ltd (ASX: WGX) share price sunk 5% lower to $1.45 today, before springing back up to $1.53, just 0.2% below Monday’s closing price.

In the morning, the company updated the market on its production guidance for calendar year 2018, announcing a lower output than previously expected. According to the new forecast, Westgold’s operations in Western Australia will produce 275,000 ounces of gold in 2018, compared to the 340,000 ounces announced in February.

A number of events contributed to the downgrade, including flooding at the Meekatharra project and repairs at the Higginsville mine.

However, the revised guidance mostly reflects the sale of the South Kalgoorlie operations to Northern Star Resources Ltd (ASX: NST) for $80 million at the end of March. South Kalgoorlie was expected to produce about 60,000 ounces of gold in 2018, but it was Westgold’s shortest life asset and it was divested to provide the company with cash.

Westgold reassures that production growth will continue in coming years with the commencement of production at the Big Bell mine, set to add approximately 100,000 ounces per annum to the group’s output starting from 2020.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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