Interview with Chairman & CEO Paul Huet, Karora Resources and Wayne Bramwell, Managing Director of Westgold Resources.

Our previous interview: https://www.cruxinvestor.com/posts/karora-resources-tsxkrr-westgold-merger-creates-gold-powerhouse-5192

Recording date: 19th April 2024

Karora Resources and Westgold have announced a merger that will create Australia's third largest gold company, with annual production of 400,000 to 450,000 ounces. The combined entity will have a proven management team, a focus on profitable ounces, and significant organic growth potential.

The merged company brings together two teams that have successfully executed operational turnarounds in recent years. Karora Chairman and CEO Paul Andre Huet praised his counterpart, saying, "What an amazing journey, only in this for two years...What a better man - you don't want this in the best person to run our company. That's the kind of person we want. Don't worry so much about making the ounces every time. Worry about making money."

Under Wayne Bramwell's leadership, Westgold has pivoted from a "myopic focus on producing gold at all costs" to a more sustainable model centered on margin and free cash flow. By shutting down money-losing mines, redeploying resources, and empowering site teams, Bramwell and his team have generated positive cash flow for five straight quarters.

The merger will allow the combined company to apply this cash flow focus to Karora's assets, which include the high-potential Beta Hunt mine. Bramwell sees an opportunity to reduce contracting costs by deploying Westgold's extensive mining fleet. "Removing those contractors and driving the cost out, replacing them with the expanded Westgold resources is going to be a quick win," he explained.

The combined company will also have significant organic growth potential. Westgold is acquiring additional drill rigs, with plans to "give at least three to Steve Devlin and the team at Beta Hunt to basically start beating the hell out of that asset," according to Bramwell. Huet noted that the company's free cash flow generation will allow it to both pay dividends and reinvest in high-return projects.

Given the shared focus on profitable growth and the existing relationships between the Karora and Westgold teams, the companies expect a smooth integration focused initially on back-office synergies and learning the combined asset base. "You probably won't start to see the real market-visible integration until probably the second or the third quarter," said Bramwell.

For investors, the merged company presents a compelling opportunity to gain exposure to a leading mid-tier gold producer with scale, free cash flow, and organic growth. The combined management team has a demonstrated track record of operational execution and margin-focused decision-making. With a larger profile and potential index inclusion on the horizon, the company appears well-positioned for a re-rating as the gold industry continues to consolidate.

While the merger is not without risks, including the inherent challenges of integrating two companies, the strategic rationale is sound and the potential rewards are significant. As Huet put it, "Watch what happens with the rerate when the ASX 200 comes in, when the GDX comes in, all those ETFs comes in. People will see, wow, this is one heck of a great story. This is a great company led by a great man."

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Learn more: https://cruxinvestor.com/companies/karora-resources

https://www.cruxinvestor.com/companies/westgold-resources-limited

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