Ramelius Resources Limited (ASX: RMS) is a Western Australian gold producer that has been listed on the ASX since 2003 and in production since 2006. Ramelius currently operates the Mt Magnet, Vivien, Edna May and Marda gold mines and associated processing plants around Western Australia. The Company has enjoyed significant success in recent years with increased gold production and the addition of new assets including the Marda and Tampia Hill gold projects, both also in WA. Ramelius has a market capitalisation of $836 million.
What are the key features of Ramelius HY20 report?
Revenue from gold sales in HY20 fell 13% to A$158 million compared with HY19. However, EIBTDA rose 32% to A$65.9 million and NPAT rose 329% to A$20.5 million. Ramelius is debt free and holds A$87.7 million in cash and bullion as at 31 December 2020.
What are the drivers of this result?
The fall in revenue is attributed to falling production (down 11.5%) and gold sold (down 20%), partly offset by rising realised gold price (up 9%). Costs of production (AISC) rose slightly to A$1,240 per ounce in HY20 compared with A$1,220 per ounce in HY19. Improving grades, particularly at the Mt Magnet mine which were up 18% in HY20 compared with HY19, was an important driver of the positive earnings result.
In HY20, Ramelius spent A$78.9 million investing in future long term mine development. This includes A$51 million on mine development, A$14 million on planet and equipment and A$8 million on exploration.
What is the outlook for Ramelius?
Ramelius production and cost guidance for FY20 of 205,000 to 220,000 ounces at an AISC of A$1,225 to A$1,325 per ounce remains on track. Consequently, gold production is expected to be much stronger in the second half of FY20.
Ramelius, like all gold miners, is benefiting from the current strong gold price of around US$1,640 per ounce and the weak $US/$A exchange rate of 0.66. Consequently, the $A gold price of around A$2,480 per ounce is around all-time highs.
What is the market reaction?
The market reaction to Ramelius’ HY20 result is positive. The Ramelius share price is up around 12% following the announcement of the HY20 result and is currently trading at A$1.42. Gold stocks are up strongly today (around 4%) while the ASX200 is down around 2%. Ramelius trades on a forward P/E ratio in the mid-twenties and does pay a dividend.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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