Karora Resources & Westgold Resources Merge to Create Australia's 3rd Largest Gold Producer

• Paul Andre Huet and Wayne Bramwell discuss the merger of their gold mining companies, Karora Resources and Westgold, to form Australia's 3rd largest gold company.
• The merged company will have 400-450k oz annual production, significant synergies, and strong free cash flow generation.
• Wayne has turned around Westgold over the past 2 years by focusing on profitable ounces, reducing costs, and empowering site teams.
• The integration will leverage Westgold's equipment and resources to enhance Karora's assets like Beta Hunt. The focus will be on free cash flow over ounce growth.
• The merger is expected to close in July 2024 and will be a re-rating opportunity as the company gains index inclusion. The teams are excited to work together.

The Merger

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 deal, expected to close in July 2024, brings together two management teams that have successfully turned around their respective companies in recent years.

"We're forming together the third largest gold company in Australia - 400 to 450,000 ounces annual production, completely unhedged, with a tremendous amount of synergies," said Paul Andre Huet, Chairman and CEO of Karora Resources. "It's been very well received by a tremendous amount of our shareholders."

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

A Shared Focus on Profitable Growth

Both Karora and Westgold have undergone significant transformations, shedding unprofitable operations and focusing on margin over pure ounce growth. Wayne Bramwell, who will lead the merged company as Managing Director and CEO, took the reins at Westgold two years ago when it was "not in great shape."

"The turnaround was really about very quickly getting on top of what our real cost base was, because our cost control was not where we wanted it to be, start to look at the assets we were running," explained Bramwell. By closing money-losing mines, redeploying resources, and empowering site teams, Westgold has generated positive cash flow for five straight quarters.

Karora has executed a similar playbook under Huet's leadership. "What an amazing journey, only in this for two years," Huet said of Bramwell's accomplishments, noting his willingness to shut down uneconomic mines. "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."

Enhancing Karora's Assets

The merger will allow the combined company to leverage Westgold's extensive equipment fleet and personnel to enhance Karora's assets. This includes deploying additional drill rigs at the high-potential Beta Hunt mine.

"Removing those contractors and driving the cost out, replacing them with the expanded Westgold resources is going to be a quick win," said Bramwell. "And the most exciting thing we're looking at is currently we've got 13 underground drill rigs. We've just bought another six...and we want to give at least three to Steve Devlin and the team at Beta Hunt to basically start beating the hell out of that asset."

A Smooth Integration

Given the shared focus on profitable growth and the existing relationships between the Karora and Westgold teams, the companies expect a smooth integration. The initial focus will be on back-office synergies and learning the combined asset base.

"Once we finally get married, and hopefully Paul and I are walking down the aisle sometime in July, figuratively speaking," Bramwell joked, "what we will do for three months is probably send one or two people to the Karora assets to watch, listen and learn...You probably won't start to see the real market-visible integration until probably the second or the third quarter."

The Investment Thesis for the Merged Company

• Significant scale with 400-450k oz of annual production, the 3rd largest gold producer in Australia
• Proven management team with a track record of executing operational turnarounds and generating free cash flow
• Meaningful synergy potential, including deploying Westgold's mining fleet to reduce Karora's contracting costs
• Organic growth opportunities, particularly at the high-grade Beta Hunt mine
• Potential for a market re-rating as the merged company gains index inclusion on the ASX 200 and GDX

The merger of Karora Resources and Westgold presents a compelling investment opportunity. By combining two successfully turned-around companies, the deal creates a leading mid-tier Australian gold producer with significant scale, free cash flow generation, and organic growth potential.

The integration, led by Wayne Bramwell and the combined management team, is expected to unlock meaningful synergies while maintaining each company's focus on profitable ounces. With a larger profile and index inclusion on the horizon, the merged company appears well-positioned for a market re-rating as the gold industry continues to consolidate.