Resolute Mining Ltd (ASX: RSG) has announced it has entered into a binding agreement with Toro Gold, acquiring all shares for a price of $274 million paid in $130 million cash and $142.5 million worth of Resolute shares.
The Company is trading at $1.87 in response to the acquisition up 11% for the day and trading well above the price of $1.62 it fell to earlier in the week due to a falling gold price and higher market expectations for Resolutes quarterly reports.
The share price of Resolute is also responding to a 1.4% rise in the price of gold to US$ 1434/oz as a result of US President Donald Trump imposing a 10% tariff on the remaining $300 billion worth of Chinese goods. This will deteriorate investor confidence as firms pass on the cost of the tariff to consumers resulting in a fall in consumption and decrease in company profit. Investors buy gold in times of uncertainty, as Trump's actions have created in order to secure wealth.
Resolute is an international gold producer with mines in Australia (Ravenswood), Mail (Syama) and Ghana (Bibiani) that collectively produced over the past 12 months 305,000oz of gold at an all-in sustain cost (AISC) of US$924/oz, these results released on the 30 July were in line with guidance. The majority of this is produced at Resolute nearly complete autonomous mine at Syama, with expectations for FY19 that 270,000oz of gold will be mined at an AISC of US$890/oz.
The Company’s acquisition of Toro Gold incorporates the Mako mine located in Senegal into Resolute’s portfolio, Mako is a low-cost high margin mine that produced 156,000oz at an AISC of $US655/oz in 2018. The acquisition increases Resolute’s FY19 guidance to 400,000oz at an AISC of US$960/oz from previous expectations of 330,000oz at US$990/oz.
The acquisition will allow Resolute to diversify its asset base on the African continent and continue its goal of paying dividends at a value of 2% annual gold sales.
Toro Gold also has over 2800km2 worth of tenements across Senegal, Cote d’Ivoire and Guinea opening up new opportunities for the Company in the future.
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