Key Takeaways:
Western Gold expects its first-quarter net profit to surge by more than 1,700 percent, driven by a rally in gold prices and increased sales volume.
In a preliminary earnings announcement filed Tuesday, the company projected a net profit attributable to parent company owners of 450 million to 560 million yuan for the first quarter of 2024.
The forecast represents a dramatic increase from the retrospectively adjusted 23.72 million yuan earned in the same period last year. The growth was primarily fueled by a combination of higher sales volumes for its gold products and a significant rise in both gold and electrolytic manganese prices.
The enormous year-over-year growth percentage is also magnified by an accounting change following the company's acquisition of Xinjiang Meisheng Mining Co. in August 2023, which required the previous year's results to be restated lower.
Western Gold's core business operations provided the fundamental driver for the quarter's performance. The company explicitly cited that "gold product sales volume increased compared to the same period last year, and sales prices rose."
Before the retrospective adjustment, the company's net profit in the first quarter of 2023 was 35.68 million yuan. Based on the midpoint of the new forecast, the projected profit is approximately 14 times higher than the originally disclosed figure for the prior year.
The company completed the purchase of 100% of Xinjiang Meisheng Mining from its controlling shareholder in August 2023.
Under corporate accounting standards for mergers under common control, Western Gold was required to retrospectively adjust its 2023 financial data. This adjustment lowered the Q1 2023 net profit from 35.68 million yuan to 23.72 million yuan, thereby inflating the statistical base for the year-over-year growth calculation to a range of 1,797% to 2,261%.
The company's net profit excluding non-recurring items is forecast at 440 million to 570 million yuan, an increase of 950% to 1,261% from the prior year's 41.9 million yuan, showing the growth is mainly from its principal operations.
The strong preliminary results demonstrate the significant operational leverage gold miners have to metal prices, suggesting a period of robust earnings for the sector if gold remains elevated. Investors will watch for the final audited results to confirm margins and production costs.
This article is for informational purposes only and does not constitute investment advice.
