Westgold to spin out non-core assets, launch Australian IPO

[Ben Graham]

Westgold Resources (ASX, TSX: WGX) plans to demerge by spinning out its non-core gold exploration assets in the Murchison region of Western Australia and launch an initial public offering on the ASX for their holding company, to be named Valiant Gold.

A demerger allows the company to focus on its larger and higher-grade operating assets while creating a team to advance its early-stage projects through funds raised by the IPO, Westgold said in a press release on Monday.

Included in the spinout are Reedy’s and Comet — two 100%-owned brownfield assets with a combined mineral resource of 15.6 million tonnes grading 2.4 grams per tonne gold, for 1.2 million oz. of contained gold. Both projects were previously in production (820,000 oz. at 3.8 g/t and 257,000 at 2.77 g/t respectively), before being placed under care and maintenance in fiscal 2023.

“We see value in Comet and Reedy’s, but as they are not assets of scale, they are unlikely to be redeveloped by our team in the next three years,” Westgold managing director and CEO Wayne Bramwell stated in the press release.

Therefore, a demerging of these assets would be a “capital efficient model” for the company to fast-track these projects, according to the Westgold executive.

Shares of Westgold, one of Australia’s biggest gold miners, fell by 4.6% at closing on the news, sending its market capitalization down to A$5.6 billion ($3.7 billion).

Demerger details

Under the proposed IPO, Valiant intends to raise between A$65 million and A$75 million at an issue price of A$0.25 per share. Following completion, Westgold will retain approximately a 48% shareholding in Valiant at the minimum subscription, and approximately 44% at the maximum.

To support early works on the demerged assets, Westgold said it will provide Valiant with an interest-free loan of A$3 million, for the “flexibility to progress quickly on key projects, setting the stage for future development and success.”

The demerger, upon satisfaction of conditions, is expected to be completed by late March 2026.

In its press release, the Australian gold miner also noted that the demerged assets currently do not contribute any production in its three-year outlook, and so the creation of Valiant would potentially bring forward value to its operating assets.

Westgold currently holds a tenure of more than 3,200 km² across the Murchison and Southern Goldfields regions, operating six underground mines and four processing plants with an installed processing capacity of more than 6 million tonnes per annum.

Replicating past model

Alongside the demerger, Westgold and Valiant will enter into an ore processing agreement (OPA) on market terms at the Cue and/or Meekatharra processing hubs in Western Australia.

This access will provide a fast-tracked and low-capex pathway to near-term gold production and cash flow to Valiant, whilst providing Westgold with additional ore not currently scheduled in its three-year outlook, the company said.

“This collaborative, capital-efficient model is proven, as demonstrated by Westgold’s investment and OPA with New Murchison Gold (ASX: NMG),” said Bramwell. “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.”

“Valiant can 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,” he added.

The new company will be chaired by Derek La Ferla, an experienced corporate lawyer and current chair of Chalice Mining (ASX: CHN), and led by managing director Brendan Tritton, who previously held leadership roles with Mincor Resources NL’s Kambalda operations.