Westgold Resources shares fall from near-record highs despite plans to spin out new company

Shares in Westgold Resources Ltd (ASX: WGX) pulled back on Monday despite a plan that will involve it spinning out some non-core assets into a cashed-up new company.

The gold miner said on Monday it would create a new company called Valiant Gold Ltd, which would “unlock value” from assets that were not currently part of Westgold’s three-year forward plan.

Shareholders to be dealt in

Westgold shareholders would be able to participate in a $20 million priority offer of new shares in the company, which aims to raise $65-$75 million overall prior to listing, anticipated to occur in the third quarter of FY26.

The company would contain Westgold’s current Reedy and Comet projects, “an exploration and development package including four small historic underground mines with recent production history and a combined mineral resource of 15.6 million tonnes at 2.4 grams per tonne of gold for 1.2 million ounces”.

Westgold Managing Director Wayne Branwell said it made sense to build a dedicated team around the assets, which would focus on bringing them to production.

By establishing Valiant, we create an independent, well-funded gold company that can bring forward value from smaller assets such as the Comet and South Emu-Triton underground mines and unlock the exploration potential across the Reedy and Comet packages. Valiant will have a fast-track to cashflow with an ore purchase agreement (OPA) to be entered into with Westgold. This collaborative, capital efficient model is proven, as demonstrated by Westgold’s investment and OPA with New Murchison Gold (ASX: NMG). This model saw NMG transition from explorer to producer, with gold production from NMG’s Crown Prince deposit now delivering high grade oxide ore to Westgold’s Meekatharra processing hub.

Mr Bramwell said Vailant would look to replicate this success.

With several small underground mines in care and maintenance, a range of open pit opportunities, and exploration upside, the Valiant team has multiple near-term restart and growth options to deliver near term cashflow.

Westgold said a Board and management for the company had already been selected, with Brendan Tritton named as Managing Director.

Broker gives it the tick

Analysts at RBC Capital Markets said the move was positive for Westgold shareholders.

Westgold’s spin-off of exploration assets currently outside its 3-year outlook is a laudable attempt to realise value for assets otherwise forgotten by the market. New company Valiant should place greater exploration and project emphasis on spun-out assets than would a broader Westgold, which already has a material pipeline of mine upgrades and development options. We maintain our view that a recent doubling in gold price has created material industry-wide opportunities for realising new mine & mill combinations. This vehicle adheres to that principle, with meaningful overall gold resources.

RBC has a price target of $7.80 on Westgold shares, compared with $5.91 on Monday, down 3.1%. The 12-month high for the shares is $6.25.

Westgold was valued at $5.6 billion at the close of trade on Friday.

The post Westgold Resources shares fall from near-record highs despite plans to spin out new company appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.