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Strong 2023 finish for gold miners

Early December quarter production reports from a string of mid-level gold miners have painted a positive picture for the industry, as they closed out a challenging 2023 with robust performance. The late surge in gold prices in 2023 had a dramatic impact on revenue and earnings across the sector.

Quarterly and early half-year updates from prominent players such as Gold Road, Westgold, Red 5, and Silver Lake indicate that the industry has managed to rein in costs, positioning themselves to capitalize on the surge in gold prices.

Red 5 Sets New Records

Red 5 (ASX:RED) reported exceptional performance in the December quarter, with gold production at its King Of The Hills (KOTH) mine reaching a record 53,017 ounces. This marked the third consecutive quarter with production surpassing the 50,000-ounce mark.

Notably, Red 5 only began mining at KOTH in December 2022, making a year-on-year comparison irrelevant for 2023. Production for the six months leading up to December totaled an impressive 108,026 ounces, putting the company on track to achieve the upper end of its FY24 production guidance of 195,000 – 215,000 ounces.

The company also revealed that gold sales for the quarter reached 53,087 ounces at an average realized price of $A2,619 per ounce. While some production was hedged, preventing them from fully capitalizing on surging prices, Red 5’s performance was still commendable.

Red 5 affirmed the strong performance of all three of its mines, emphasizing that “robust cash generation” enabled them to make an additional voluntary debt repayment of $2 million on top of the scheduled $8 million principal repayment, further strengthening its financial position. At the end of December, Red 5 held $53.2 million in cash, trade receivables, and bullion, with total outstanding debt reduced to $102.8 million.

Gold Road Resources Maintains Resilience

Gold Road Resources (ASX:GOR), despite falling slightly short of investor expectations, presented a solid performance update for its 50% owned Gruyere mine in Western Australia, shared with Gold Fields.

The company reported annual output of approximately 321,978 ounces (Gold Road’s share: 160,989 ounces), just surpassing the lower end of its guidance range of 320,000 to 350,000 ounces. This achievement, while below market expectations, outperformed the challenging year of 2022, which was marred by Covid restrictions and labor shortages, resulting in a total production of 314,647 ounces.

The company also experienced a 16% drop in fourth-quarter output compared to the previous quarter, primarily attributed to unexpected labor availability issues in December.

Nevertheless, Gold Road Resources ended 2023 on solid financial footing, with $149.8 million in liquidity, down from $209 million at the end of September but significantly higher than the $80 million reported at the close of 2022. Importantly, the company remained debt-free and continued to invest in its future, with investments worth $465 million at the end of the year.

The December quarter’s gold sales showed the company’s potential, with 37,037 ounces sold at an average price of $A3,040 per ounce, generating total revenue exceeding $A112.6 million. This 22% increase compared to the final quarter of 2022 hinted at the positive impact of the surge in gold prices in the latter part of 2023.

Silver Lake Resources Stays on Course

Silver Lake Resources (ASX:SLR), despite its pursuit of the Leonora assets of St Barbara in 2023, remained focused on its core gold mining operations and delivered solid figures for the December quarter and half-year.

Sales for the quarter included 57,360 ounces of gold and 239 tonnes of copper, while the half-year total consisted of 122,781 ounces of gold and 534 tonnes of copper, with the majority coming from Western Australian operations.

Silver Lake’s comment on sales from Deflector and Mount Monger operations aligning with FY24 guidance left investors anticipating further positive news in the upcoming quarterly report.

The company finished the half-year with a strong financial position, holding cash and bullion worth $285 million and no debt. Liquid investments amounted to $136 million, resulting in a net cash, bullion, and liquid investments position of $421 million at the end of 2023, compared to $358 million at the close of September 2024 and $235 million in December 2022.

While production data, prices for gold and copper, and cost details were not provided in the latest update, Silver Lake’s impressive sales figures hinted at a positive trajectory.

Westgold Resources Benefits from Surging Gold Prices

Westgold Resources (ASX:WGX) anticipated a surge in revenue for the December 2023 quarter due to the late-period spike in gold prices. Although the company saw a slight dip in gold production compared to the previous year’s December quarter, a nearly 50% increase in the Australian dollar gold price promised a significant boost to shareholders’ earnings.

Westgold reported gold production of 59,238 ounces in the three months to December, down from 63,104 ounces in the September quarter and 62,180 ounces in the same period of 2022. However, gold production for the entire six months leading up to December 2023 reached 122,434 ounces, slightly lower than the 128,228 ounces in the same period of 2022.

The favorable gold prices, averaging above $A3,041 per ounce in the latest period, translated into revenue of $180 million for the December 2023 quarter. This marked a significant improvement from the same quarter in 2022 when lower gold prices resulted in revenue of approximately $A128.7 million.

The anticipated $53 million boost to revenue in the half-year accounts for February 2024 highlighted the positive impact of the surge in gold prices, promising a bright outlook for the company.

In summary, mid-level gold miners have demonstrated resilience and adaptability in the face of challenges in 2023. The surge in gold prices has provided a lifeline for the industry, with companies like Red 5, Gold Road Resources, Silver Lake Resources, and Westgold Resources reaping the benefits and positioning themselves for a promising 2024. Investors are keeping a close eye on the sector as it continues to respond to dynamic market conditions.