Macquarie downgrades Westgold after $1.2b Karora merger
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The news: Macquarie analysts have downgraded their rating on Westgold Resources after the ASX-listed gold miner announced a merger with Canadian play Karora Resources on Wednesday.
The numbers: The analysts said they expect Westgold's $1.2 billion acquisition of Karora to lift the miner's production by around 70% over the next five years and double on a 10-year basis. However, Macquarie downgraded Westgold to 'neutral' as the miner's shares on issue will double through the merger.
Macquarie analysts reduced their earnings per share estimates for Westgold by 53% in FY25, 64% in FY26, 78% in FY27 and 81% in FY28. They also lowered their target price on the stock by 19% to $2.20.
Westgold last traded 0.5% lower at $2.09.
The context: Wednesday's merger announcement arrived a few days after Westgold's ASX rival Ramelius ended discussions with Karora without a deal.
The acquisition will see Westgold add Karora’s WA-based mines Beta Hunt, Higginsville and Lakewood Mill to its operations, as it targets a portfolio capable of producing more than 400,000 ounces of gold per year.
The source: Macquarie research
