This has been a much raised on this topic on this forum, but not called out separately this point. Perhaps a reason for the recent weakness in share price which we would all like to understand and some in the know better about than the rest of us.
WGX creditor position appears to be significantly out of line with its peers, and in fact the combination with Karora would appear to have combined with a counterparty with an equally bad creditor position. WGX have not historically had such a creditor position, but the past 12 months has seen their creditor position rise dramatically and I do wonder if in the washout of this Karora deal they will need to clear this through a chunky equity raising to shore up their balance sheet.
The most comparable company i can compare with to WGX is RMS, granted WGX combined with Karora is now larger, however something does not look quite right here. Why have WGX creditors been increasing so significantly over the past 12 months, and they have combined with Karora who appear to have an equally high creditor position on a relative basis. If anything, one would have thought that as owner operator, WGX creditor position may be lower than others that have large lumpy contractor payments to make that WGX do not have as owner operator.
Pulling the data below, you can see that WGX on a standalone basis was increasing its payables in a big way last year pre-Karora. When combined with Karora, they would appear to have a creditor balance of $210m...significantly less than their pro forma cash position based on WGX merger presentation....how do they intend to normalise this position?
Perhaps there is another answer to this, or maybe WGX have been managing their cash flow to appear as if they appear are making free cash flow but in fact are building a creditor balance which they intend of paying back with an equity raise now they have completed the Karora deal? Hopefully not.
| Company | Westgold | Karora | Westgold + Karora | Ramelius |
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| 1 | Creditor Balance (A$M) |
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| 2 | Jun-24 | 148 | 62 | 210 | 66 |
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| 3 | Dec-23 | 117 | 66 | 183 | 72 |
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| 4 | Jun-23 | 79 | 46 | 125 | 70 |
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| 5 | Dec-22 | 72 | 71 | 143 | 80 |
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