Company Overview: Resolute Mining Limited is engaged in gold mining, and prospecting and exploration for minerals. The Company operates through three segments: Ravenswood, Syama and Bibiani. It operates over two mines, the Syama gold mine in Africa and the Ravenswood gold mine in Australia. The Syama gold mine is approximately 30 kilometers from the Cote d'Ivoire border and over 300 kilometers southeast of the capital Bamako. The Ravenswood gold mine is approximately 95 kilometers south-west of Townsville and over 60 kilometers east of Charters Towers in north-east Queensland. Its key development focus is in Mali. It has a portfolio of open pit oxide resources located in various satellite pits to the north and south of the main Syama pit. In Ghana, it owns over 90% underground Bibiani Gold Project. It is exploring over 10,800 square kilometers of prospective tenure across two continents and holds Birimian age greenstone tenure in West Africa, with tenements across Mali, Ghana and Cote d'Ivoire.


RSG Details

Resolute seems to be a lucrative gold miner with a strong balance sheet and good growth prospects. The group’s results have been in line with the expectations as it successfully navigates a challenging short-term period of declining stockpile grades at Syama and lower production at Ravenswood. It is expected that production and unit cost will be improved in the second half as it is progressing with high grades at both Syama and at Ravenswood. Resolute’s ambition is to become a technology-driven, multi-miner and a low cost global gold producer. It has a world class tenure that covers an underexplored belt which already yields several multi-million ounces of ore bodies.
 

Key Assets (Source: Company Reports)
 
Decent Financial Performance: The Group reported A$38 million of net profit for the half year (ending on 31 December 2017). Revenue for the period was up by 20 per cent from the previous period and amounted to A$203 million. Cash, bullion and listed investment decreased to a market value of A$196 million (June 2017: 290 million) and cash/bullion net of debt decreased to A$150 million (June 2017: A$248 million). The Board declared and paid a final dividend for FY17 of 2.0 cents per share and this was paid in cash and bullion through an innovative-gold sale linked dividend policy. An Average cash price received for 121,480 ounces of gold sold was A$1,678/oz and whereas it was A$1,784/oz for 1H17. Gold production and cost guidance for the full financial year has been maintained at 300,000oz at an All-in Sustaining cost of A$1,280/oz. Net Cash Flow from operations amounted to A$186 million (FY16: A$193 million).
 

Operating Performance over three years (Source: Company Reports)
 
Resources’ Updates: Underground mine development at the Syama Gold Mine in Mali is expected to be completing the sublevel cave development in December 2018 as it is progressing well. Total underground Mineral Resources at the Syama Underground mine increased by 39 per cent and amounted to 5.7 million ounces at 3.2 gram per tonne of gold. It continues to successfully transit its underground mining to the large scale open pit operations that are envisaged in the Ravenswood Expansion Project.  A feasibility study has started that aimed at modifying mining schedules and tailings disposal strategies to maximise the project returns. The Group announced an increase of 40 per cent in resources (2.5 million ounces at 3.6 grams per tonne of gold) at Bibiani Gold Mine in Ghana.
 

Syama’s Underground Development (Source: Company Reports)
 
Performance of Sulphide and Oxide Processing Plant: During FY17, sulphide processing plant treated 2.11 million tonnes (2016: 1.50 mt) of ore at an overall head grade of 2.59 grams per tonne (g/t) Au (2016: 3.53/t Au) and produced 136,000oz of gold at an AISC of A$1,001/oz (2016: A$917/oz). The lower grade was in line with an expected reduction in head grade as the ore stockpiles that were remaining at the Syama open pit operations continued to get depleted. Sulphide ore stockpiles at year end amounted to approximately 149,000 oz and these stockpiles will continue to be blended with sulphide ore from the satellite open pits. Several improvements were made at the oxide processing plant which included modifications at the process water circuit. Oxide circuit recoveries amounted to 83.2 per cent (2016: 86.2 per cent) which were affected by the transitional material from the A21 satellite operations. During FY17, mining of A21 satellite pits was completed and mining of the BA-01 satellite commenced. The underground development of ore is expected to grade in range of 2.5-3.0g/t Au.
 
  
Operating Performance for Sulphide and Oxide Processing Plant (Source: Company Reports)
 
Managing exposure to risks: Resolute is continuously seeking ways to improve its risk management system. It is exposed to different kinds of risk relating to Asset Portfolio as Resolute’s revenue is derived from two assets (Syama and Ravenswood) and reliance on two assets in two different geographical locations requires continual focus on managing efficient operations; Financials as Group’s financial performance is closely linked to the market price of the gold and can be impacted by inability to secure adequate funding; and Safety as it is subject to several hazards like risk of any serious injury or of fatality while working on the site.

Review of Operations:  At Syama, Resolute implemented a series of process upgrades with the main objective of increasing gold recovery to 85 per cent (Project 85). At Syama, the Group was working closely with Outotec, the manufacturer of the roaster to develop a new roaster technology that produces a low carbon calcine to improve CIL (carbon in leach) recovery. This new technology allowed Resolute to modify the current single stage of Circulating Fluidized Bed roaster into a Low Carbon Roaster (LCT). During the year, underground development commenced on the first and on the second production levels (1130 and 1105 levels). One sector of the Floatation Tailings Storage Facility (FTSF) of the Project Phoenix was drilled during the year using aircore drilling and these results from the drill holes provided sufficient confidence to the Board so that it can approve the additional funds which will help in conducting a specialised drilling program to further test the grades and tonnage within the FTSF.  The lost time injury frequency rate improved by 18 per cent as compared to the previous year which was derived from the improved performance at Ravenswood.
 

A Section of sublevel Cave Mining at Syama (Source: Company Reports)
 
Implementation of A$ gold hedge: The group is expected to benefit from the forward sale of 72,000 ounces of gold at an average price of A$1,715 per ounce and had scheduled monthly deliveries of 4,000 ounces between December 17 and May 19. The average gold price received in the forward sale contracts of A$1,715 was at a significant premium that is above the Resolute’s budget gold price of A$1,600P per ounce. It took the advantage of the recent strength in the A$ gold price which helped to establish a gold hedge position that will support Ravenswood Expansion Project. The objective of the hedging was to protect the project returns during the development phase of the 13 year mine life of the Ravenswood Expansion Project. This hedge was an addition to the remaining forward sales program covering 84,000 ounces (average price of US$1,330 per ounce) which was established to support the Syama Underground Mine development. Now after combining both, the Group’s total hedge position represents approximately 30 per cent of the expected gold production over the next 18 months.

Transformational Steps for Growth: The Group mined more than 8 million ounces from 9 gold mines in Australia and in Africa. It has large and growing resource base and focuses on technical excellence and innovative advantage. It has built a diversified portfolio for Resolute gold mines. It increased the investment in exploration and looked into some value generating acquisition opportunities. It got regulatory approvals for recommencement of mining at Sarsfield and achieved positive exploration results from Nafolo, Tabakoroni and BA-01 which highlighted underground mining opportunities that had potential to complement the existing Syama mine plan.

Stock Performance: While FY18 exploration expenditure is expected to go up given the business expansion efforts, Resolute remains strongly leveraged to future upside in the gold prices as the hedge book represents only 30 per cent of the expected gold production till May 19 and accounts to less than 5 per cent of the Group Ore Reserves. Its underground development has advanced to more than 8 km and semi-automated drilling with Sandvik DD422i allowed longer rounds and more of rapid underground development with less of breaks. ROE in 2017 was 25.9 per cent and in 2016 was 40.6 per cent. Debt to Equity in 2017 was 0.05 as compared to 0.07 in 2016 and ROIC was 28.0 per cent as compared to 40.5 per cent in 2016. The stock climbed up by 14.42 per cent in the past three months and by 10.3 per cent in the past one month. Recently, Dimensional Entities, the substantial holder of RSG enhanced the interest from a holding of 37,101,766 shares with 5.004 per cent of the voting power to 44,640,564 shares with 6.20 per cent of the voting power. By looking into the overall performance and volatile market scenario where safe haven stocks are good to punt on, we recommend a “Buy” on RSG at the current market price of $1.21
 

RSG Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.