Stock of the Week Resolute Mining (RSG)


Stock of the Week – Resolute Mining (RSG)

Resolute Mining (RSG) is a gold mining and exploration company, operating primarily in Africa and Australia and may be one of the shares to buy.

The group’s portfolio focus is on Africa, but the miner also has projects in Australia, Mali and Tanzania.

RSG has three operating mines: Golden Pride in Tanzania, Ravenswood in Queensland, and the newly re-developed Syama in Mali, which was once a BHP Billiton operation.

RSG’s operations are well-placed, and exploration is likely to lead to further resource discoveries, underground, and in nearby pits.

The company continues to benefit from a boom in gold prices.

Growing production

RSG’s notable Australian asset is its Ravenswood project, located 95kms south west of Townsville, which includes the Mt Wright underground project. Mt Wright continues to progress to expectations, with resource drilling upgrading the resource from indicated to measured.

At Ravenswood, whilst the milling priority will be the higher grade Mt Wright ore, it will continue to operate at around five million tonnes per annum, using low grade stocks left over from the now-closed Sarsfield open pit.

In April, RSG confirmed it has intersected high grade gold mineralisation at its Welcome Breccia prospect, 40km north-west of the company’s Ravenswood gold mine in North Queensland.

RSG’s Golden Pride project is situated in a lucrative area of Tanzania, with the mine having produced over 1.68 million ounces of gold since commissioning in 1998. The coming year should see an increase in gold production with ore grade from the open pit increasing, as the fresher ore is exposed in the central pit.

The Syama gold mine (80% owned by RSG, 20% by the Malian Government) is located in the southern part of Mali, West Africa, which is an emerging gold belt region. The mine has the potential for over ten years of operation.

Syama has suffered a few interruptions and small component failures, but overall progress will achieve expected results. RSG intends the operation to ramp up to 250,000 ounces production per annum.

A golden time

While base metals suffered over the global economic downturn, one metal to emerge from the metals slump looking strong has been gold, which demonstrated amazing strength in 2009-10.

The precious metal remains in high demand due to a volatile US dollar and economic uncertainty.

Such uncertainty includes fears of Greece’s economic troubles, which has dominated global economic sentiment of late.

These fears have driven investors to gold as a safety investment. With the precious metal now up above US$1,200 per ounce, it seems likely that investors will continue to turn to gold as a refuge from euro-region risk.

Most forecasts are pointing towards further gains in the gold price.

Quarterly update

RSG’s most recent report is for its March quarter, where the company achieved 89,244 ounces of gold at a cash cost of $828 per ounce.

Production at Golden Pride for the quarter was 35,698 ounces of gold at a cash cost of $566 per ounce, down from $577 per ounce in the prior year.

Gold production at Ravenswood generated 30,034 ounces at a cash cost of $846 per ounce.

Production at Syama in Mali was 23,512 ounces of gold, up from 21,670 ounces of gold in the prior year, at a cash cost of $1,203 per ounce.

As at 31 March, RSG had $16.4 million in cash and bullion. The cash and bullion balance at 31 March was subsequently bolstered by a further $9.5 million on 1 April when the balance of March’s gold produced was shipped from RSG’s mine sites.

On 29 March, RSG confirmed it was to acquire 33.2% of an upcoming float of Viking Ashanti.

In exchange for the shares, RSG will sell its Ghanaian gold assets to Viking Ashanti. RSG believes that its gold assets will benefit from an accelerated exploration program, which will be financed by the IPO.

The IPO is for an issue of 26.7 million shares at 30 cents each.

Outlook

RSG is a gold miner and explorer operating in Africa and Australia, with its flagship projects – Ravenswood, Golden Pride and Syama – all progressing swimmingly.

Though 2006/07 was a rough time for RSG – as was the second half of C2008, in-line with the commodities downturn – more recent times have been positive for RSG.

The gold price is now up near record highs, and as global economic attention continues to focus on Greece’s debt problem, RSG should continue to benefit from its gold exposure into the future.

The group has done well to expand its operations and continue exploration since early last 2008, when its focus was on just two operating mines.

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