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

Leading gold miner with more than 25 years of continuous production, Resolute is an experienced explorer, developer, and operator, having operated nine gold mines across Australia and Africa that have produced 8 million ounces of gold. Resolute has now set its growth trajectory based on its key mines, the Syama Gold Mine in Africa and the Ravenswood Gold Mine in Australia, and is one of the largest gold producers listed on ASX. It is also exploring over 6,600km of potential world class tenure in West Africa and Australia with active drilling programs in Mali, Ghana, Cote d’Ivoire and Queensland, Australia. The Company is focused on growth through exploration and development and is active in reviewing new opportunities to build shareholder value. The Group has also identified further opportunities to enhance its development plans at Syama. While the group lately released a consistent quarter update that entailed cash flow result in line with market expectations, the group lagged a bit in realising the expected improvements in recovery and grade at its Syama sulphide operation. This led to a 20koz reduction in its FY18 guidance. Nonetheless, RSG has a healthy long-life growth pipeline to seed the potential for over the next 2 years. It is also worth noting that Syama’s sub-level cave production is due by the end of this year and RSG is progressing with the Ravenswood’s expansion project to 5Mtpa. The updates are expected in FY18 and to be in line with the group’s estimates.


Overview of Syama Gold Mine in Mali (Source: Company Reports)

Quarterly Activities Report: Resolute Group has demonstrated consistent improvement in its health and safety performance. This has been achieved through a focus on critical risk reduction and mitigation strategies as well as the application of leading health and safety key performance indicators. While production increased from sulphide operations during the March 2018 quarter as a result of significantly higher throughput, the expected improvements in grade and recovery were not realised. Higher throughput was achieved due to increased roaster efficiency following the planned shutdown of the circuit completed during the December 2017 quarter. 66,685 ounces of gold was produced as compared to December 2017 production which was around 66,581 ounces. After three quarters (Sept 17, Dec 17, Mar 18), the Company has produced 209,434oz of gold at an All-In Sustaining Cost (AISC) of A$1,368 per ounce. During the course of the quarter, Resolute made an investment of A$2.0 million in an Initial Public Offering (IPO) to acquire a 15.8% interest in Mako Gold Limited.


TRIFR vs Industry Average (Source: Company Reports)

During the March quarter, the Syama sulphide operation has processed a greater quantity of lower quality stockpiled material than was expected and a pre-production ore of 64,448 tonnes at 3.0 grams per tonne of gold was delivered to the processing plant. Environmental Approval was received for Buck Reef West that represented the final legislative approvals which are required for the Ravenswood Expansion Project. Strategic investments were made in emerging explorers like Oklo Resources, Loncor Resources and Mako Gold. The Average gold price that was received from gold sales of 70,159 ounces was reported at A$1,714/ US$1,349 per ounce.  Cash, bullion and listed investments accounted for A$153 million / US$121 million as at 31 March 2018. As at 31 March 2018, Resolute had an estimated recoverable GIC inventory of 92,169oz of gold (comprising 16,550oz of finished goods and 75,618oz in a circuit) with a market value of approximately A$160 million. As at 31 March 2018, total borrowings were A$38.7 million compared with A$35million on 31 December 2017.


Cash flow movement (Source: Company Reports)

Acquired a stake in Loncor Resources: The Company entered into a binding agreement to secure a 27% interest in Loncor Resources Inc (Loncor) (TSX: LN). The Agreement outlines a series of transactions which expand Loncor’s existing asset base and will result in Resolute owning 51,000,000 common shares of Loncor via CAD $2.6 million subscriptions in a placement of new Loncor shares and a ‘share swap’ of CAD $2.5 million of Resolute shares for 25,000,000 existing Loncor shares. Loncor is a Canadian gold exploration and development company listed on the Toronto Stock Exchange under the symbol code LN. Loncor holds gold prospects and resources in north-eastern Democratic Republic of Congo (DRC) which include exclusive gold rights to an area covering 2,087 km located along the Ngayu Archaean greenstone belt in the Orientale province.


Loncor Resources’ Ngayu Project Location (Source: Company Reports)

The Agreement, which is subject to completion of satisfactory due diligence and the fulfilment of agreed conditions precedent including the consent of Loncor shareholders, included a series of transactions like Loncor will issue 26,000,000 common shares to Resolute priced at CAD $0.10 per common share (Placement) and Loncor will acquire a 100% interest in two DRC companies which hold additional exploration permits in the Ngayu gold belt that will increase Loncor holdings from 1130 ‘carres’ to 1997 ‘carres’. The Agreement also commits both Resolute and Loncor to collaborate on the identification and development of orebodies in the DRC to maximise shareholder value. Upon completion of the Agreement, Resolute will hold 51,000,000 shares in Loncor which will represent approximately 27% of the undiluted share capital of Loncor.
 

Syama Underground development progress (Source: Company Reports)

Financial Performance: The Group reported a half-year net profit after tax of A$38 million for the six months ended 31 December 2017. Revenue for the period was A$203 million, up 20% from the previous half year. The total half-year gold production of 142,748 ounces (oz) was achieved at an All-In Sustaining Cost of A$1,395/oz (US$1,092/oz). The results were in line with its expectations as the group navigated through a challenging short-term period of declining stockpile grades at Syama and lower production from Mt Wright at Ravenswood. Total underground Mineral Resources at the Syama Underground mine increased by 39% to 5.7 million ounces at 3.2 grams per tonne of gold. At the Bibiani Gold Mine in Ghana, it announced a 40% increase in resources to 2.5 million ounces at 3.6 grams per tonne of gold. 


Cash Flow and Bullion Trend (Source: Company Reports)

Outlook: Original FY18 gold production and cost guidance were set at 300,000oz at AISC of A$1,280/oz (US$960/oz) but the same have been revised now to 280,000oz at AISC of A$1,360/oz (US$1,020/oz) based on the latest result demonstrating reduced production from sulphide operations. Previous guidance for capital expenditure and exploration was not affected and the group expects a capital expenditure for growth projects of A$162 million (US$122 million) with an exploration budget of A$38 million (US$29 million). Resolute continues to invest in the development of its key operating assets, to secure the production of long-life low-cost mines, and in exploring for growth. Funding for these investments is provided from Resolute’s current substantial cash reserves and strong operating cash flows. Due to increased roaster efficiency, the 42-day bi-annual major roaster shut has been deferred and is now expected to take place early in FY19.


FY18 H1 Actual and FY18 H2 Forecast (Source: Company Reports)

Resolute is establishing a strategic position in north-eastern DRC by acquiring interests in successful explorers with large holdings. Following recent meetings in Accra, formal EIA (Environmental Impact Assessments) approval from the Ghanaian Government is expected to be received in the coming weeks. Mined ore tonnes from Mt Wright are expected to continue at similar levels in the June 2018 quarter. Mine production and processing from Nolans East is expected to continue for the remainder of the financial year before mining is completed. Ore feed will continue to be sourced from Nolans East, existing Sarsfield stockpiles, and Mt Wright. A study to optimise the REP (Ravenswood Expansion Project) continues, following the receipt of final approvals, from the Queensland Department of Environment Protection. Further, the full benefits of Project 85 will be received once the Syama Underground mine is fully operational and a constant source of high-grade ore from the underground mine is processed through the enhanced plant configuration.

Stock Performance: The Company’s next stage of development in Queensland is the return to large-scale open pit mining at the Ravenswood Expansion Project, which will extend the Company’s local operations for a further 13 years to at least 2029. Resolute is a profitable gold miner with a strong balance sheet and exceptional growth prospects. It anticipates an improved production and unit costs in the second half of the current financial year as it processes higher grades at both Syama and Ravenswood. When all three projects will be at their maximum capacity, production may grow up to 500,000 ounces of gold per annum. The Group changed its substantial holding in Oklo Resources Limited on 19 April 2018 from 5 per cent of the voting power to 8.7 per cent and became the substantial holder since 6 April 2018 by holding 10,000,000 securities and 15.81 per cent of the voting power. Since the start of the year, the stock has been declining that is by 2.5 per cent and was down by 5 per cent in the last week owing to the recent shortcomings while the long-term gold sector exposure is worth a consideration. We give a “Buy” recommendation at the current market price of $ 1.175 (up 3% on May 02, 2018), as it is expected that Resolute will be able to mitigate the current production shortfall and improve cost metrics in the year to follow with the upgrade of its Syama project.
 

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.