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Resolute Mining Ltd - Quarterly Activities Report

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Resolute Mining Ltd (ASX: RSG) is a gold mining company that finds, develops and operates gold mines. Resolute owns four gold mines with operations in Australia and Africa. Resolute has a market capitalisation of A$1.1 billion.



What are they key points from Resolute’s quarterly activities report?

Production for the March 2020 quarter was 110,763oz (up 7% from the previous quarter) at an all-in sustaining cost (ASIC) of US$1,007/oz. Gold recovered in the March 2020 quarter is 119,683oz, up 15% on the December 2019 quarter. Cash and bullion of US$96 million at 31 March 2020, listed investments valued at US$19 million. Finally, there has been no confirmed cases of COVID-19 at any of the company’s sites or offices and gold production has been unaffected by the pandemic.

What are the drivers of this result?

Resolute’s Mako gold mine performed well over the quarter with producing 42,186oz at an ASIC of US$694/oz. The main update from this operation is that there is a scheduled plant shut down for a complete mill reline. This commenced at the end of March and is expected to be completed in the first week of April. Resolute’s Syama gold mine also performed well over the quarter with producing 57,531oz at an AISC of US$1,083/oz.

Resolute’s management also announced the successful completion of the sale of Ravenswood gold mine to a consortium comprising private equity manager EMR Capital and leading energy and mining company Golden Energy and Resources. This sale resulted in Resolute receiving A$100 million of upfront proceeds consisting of A$50 million in cash and A$50 million in promissory notes which will earn interest at a rate of 6 per cent per annum. in addition, Resolute retains significant upside exposure to Ravenswood mine with up to A$200 million in potential payments contingent on future gold prices, future gold production from the Ravenswood mine, and the investment outcomes from Ravenswood for EMR Capital.

What is the outlook for Resolute?

Resolute’s FY20 guidance is production of 430,000oz at an All-In Sustaining Cost of US$980/oz. This guidance update removed future production from the Ravenswood operation following the sale of this asset.

The outlook for Resolute is positive. This is based on maintaining strong production levels and operating the company’s gold mines at a low cost. In addition, Resolute is benefiting from both a rising gold price of gold and a falling $A. Even though there has been a recent rally in the $US/$A exchange rate, the it remains at low level in the low to mid 60s. If this operating environment continues where $US/A$ exchange rate remains low with an increase in the gold price, gold producers such as Resolute should see increases in revenue over time.

What is the market reaction?

The market reaction to Resolute quarterly activities report is broadly neutral. Resolute share price is down around 4% (but other gold stocks are also down) and is currently trading at A$0.90.




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).
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ASR has no position in any of the stocks mentioned.

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