Westgold Resources Ltd (ASX: WGX) has more than doubled in value over the past year, but according to the team at UBS, there's more upside to be had.
This week, the broker issued a new research report on Westgold, after the company put out an update on its Meekatharra expansion plan.
Before we get to the UBS valuation of the company, let's have a look at what Westgold announced.
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Processing expansion numbers stack up
Westgold released the results of a scoping study examining the expansion of capacity at the Meekatharra processing hub from 1.8 million tonnes per year to 2.9 million tonnes per year.
The company said regarding the plans:
The Meekatharra expansion plan is being advanced as a low-capital-intensity, brownfields expansion option that leverages Westgold's existing Meekatharra infrastructure and long-lead equipment already procured. The preferred pathway is intended to remove an emerging processing constraint and create a larger, more flexible platform for the Murchison ore base, without the cost, risk or timeframe of constructing a new standalone processing plant.
The expansion plan would add 47,000 ounces of gold production per year once commissioned, with total gold production to rise to 1.6 million ounces over 10 years.
Westgold said the project would cost about $100 million and have a payback period of nine months, with commissioning targeted for FY28.
Westgold Managing Director Wayne Bramwell said:
Meekatharra is the growth engine of Westgold's Murchison business. As Bluebird–South Junction continues to expand and the Murchison open pit program ramps up, the hub is increasingly moving from being mine-constrained to processing-constrained. The MXP is a capital-efficient brownfields expansion option to address this emerging constraint. It utilises existing infrastructure and long-lead equipment already procured to increase processing capacity from 1.8Mtpa to 2.9Mtpa, without the capital intensity, execution risk or timeframe of building a new plant. Westgold will now commence feasibility-level work to confirm the engineering, capital estimate, delivery schedule and ore source assumptions ahead of a potential investment decision in late FY27.
ASX gold stock looking cheap
UBS said in a note to clients that Westgold could potentially increase gold production to 650,000 ounces per year by 2030, as a result of three separate expansion projects.
The UBS analysts said they visited Meekatharra in July and "could see numerous options for new mining fronts and potential for higher throughput".
UBS has increased its price target on Westgold shares to $8.25 from $7.75, compared to $6.87 currently.
Westgold is valued at $6.19 billion.
