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Resolute Mining Limited Share Price Rebounds with Acquisition of Toro Gold

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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.

Gold-Mine-RSG-NCM-EVN-SAR

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.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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