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A Closer Look at Resolute

A Closer Look at Resolute

 

With Resolute Mining releasing its March Quarter update this week and the share price taking a beating because of the GDXJ re-balance, I thought it would be a great time to take a closer look at Resolute Mining (ASX:RSG).

Resolute is a successful gold miner with more than 25 years of continuous production. The Company is an experienced explorer, developer, and operator having operated nine gold mines across Australia and Africa which have produced in excess of 7 million ounces of gold. The Company currently operates two mines, the Syama Gold Mine in Africa and the Ravenswood Gold Mine in Australia, and is one of the largest gold producers listed on the Australian Securities Exchange with FY17 guidance of 325,000 ounces of gold production at All-In Sustaining Costs of A$1,150/oz (US$865/oz).

Lets start with the rundown of some key facts:

  • FY17 guidance of 325,000oz @ A$1,150/oz
  • Cash on hand $139.6m
  • Bullion on hand 87,620 oz
  • Listed Investments $9m
  • Total Cash Bullion and Investments at $1700AU $297.554m
  • Estimated recoverable Gold in Circuit 70,000oz or $119m 
  • Debt $17m
  • Reserves and resources of 14.3m oz

Current Market Cap – $862,000,000
Shares on Issue – 736,982,768
Share Price – $1.17 (April 20th 2017)

Dividend Policy – 2 per cent of gold sales revenue. Dividends can be paid in cash or in the form of gold bullion if you own more than 5000 shares.

Resolute Mining’s John Welborn and Perth Mint’s Richard Hays with some gold bullion that shareholders may receive in dividends.

 

Operating Mines:

Syama gold mine in Mali
Mine life: Beyond 2028
Production Guidance FY17: 204koz
Total Reserves: 3.5Moz
Total Resources: 3.2Moz

Click image for full view

 

Ravenswood gold mine in Australia
Production Guidance FY17: 96koz
Mine life: 2029 with the extension
Total Reserves: 1.3Moz
Total Resources: 3.0Moz

Ravenswood extension which compiles of Nolans East, Sarsfield and Buck Reef West mining plans can be found on their September 2016 Announcement.

Developments:

Bibiani gold mine in Ghana

In Ghana, Resolute has completed a positive Feasibility Study for its 90% owned underground Bibiani Gold Project. Initial operating life of 5 years with production of approximately 100,000 ounces per annum with a 9-month development and refurbishment period. Total of 640koz of reserves and 1.7moz resources.

Click image for full view

 

Exploration:

​Resolute’s exploration strategy focuses on tenure close to existing operations or strategic joint ventures on ground that has been identified through our regional studies. Resolute is exploring more than 10,800 square kilometres of prospective tenure across two continents and is one of the largest holders of Birimian age greenstone tenure in West Africa, with tenements across Mali, Ghana and Cote d’Ivoire.

Mali:

We have expanded our landholding in the highly prospective Syama greenstone belt with new applications and a joint venture with TSX-V listed company Legend Gold Corp.

Australia:

Exploration in Queensland is focused on the historic Sarsfield open pit as well as the adjacent Nolans East and Buck Reef West open pit deposits, all of close proximity to the existing Ravenswood treatment facilities.

Cote d’Ivoire:

In West Africa, we have greatly increased our presence in underexplored Cote d’Ivoire with the signing of a new joint venture with ASX listed Taruga Gold on three 100% owned permits. Air core drilling of gold anomalies on the Tiebissou JV permit has commenced.

Investments:

Oklo Resources (ASX:OKU): Resolute owns 5.01%

An ASX listed exploration company with gold, uranium and phosphate projects located in Mali, Africa. The Company’s focus is its large landholding of eight gold projects covering 1,389km2 in some of Mali’s most prolific greenstone belts. Oklo’s flagship projects are concentrated in two key areas; West Mali (Dandoko, Moussala and Socaf) and South Mali (Yanfolila).

Oklo’s Dandoko Project and adjoining Moussala Project are located within the Kenieba Inlier of western Mali and lie within 30km to the east of B2Gold’s 5.15Moz Fekola Project and 50km to the south-southeast of Randgold’s 12.5Moz Loulo Mine.

Manus Resources Limited (ASX:MSR): Resolute owns 19.90%

An ASX-listed gold company that is in the process of acquiring the advanced-stage Victoria Gold Project (VGP), strategically located in the multi-million-ounce Lake Victoria Gold Field of northern Tanzania. The VGP comprises an extensive holding that hosts a number of significant gold occurrences, including several which have previously had resource estimates reported, and multiple drill-ready targets. The Project covers gently undulating terrain and is favourably located 140 km by sealed road southwest of Tanzania’s second largest city, Mwanza.

Chief Executive Office John Welborn:

Since joining Resolute in 2015 Mr Welborn has seen the share price of Resolute increase from approx 30c to a peak of $2.35 in September 2016. Mr Welborn has made some excellent moves with the company including a masterful capital raise at $1.96 in the same month to raise $150m to strengthen the balance sheet. He has also been a keen buyer of the stock in the mid-low $1’s on market, buying another 50,000 shares on Thursday, and 40,000 on Friday.

Nobody would know more about the financial position and strength of the company more than him, and if he is spending his own money buying shares on market, it deserves a closer look.

John has also made some wise investments and decisions to hold back gold sales based on currency fluctuations and the price of gold which up to date have paid off for Resolute. He has also taken the lead in the gold sector to pay out dividends in the form of gold bullion to investors, which I think more companies should follow suit as the next gold bull markets gets underway.

Buy, Sell or Hold?

I have been holding shares since 2014 buying in the 40c-60c range and holding since then. The shares have fallen with the rest of the gold sector for no fundamental basis, and got beaten over the last week because of the upcoming GDXJ re-balance. If the shares do go under $1 I will be adding to my holdings for a multi-year hold. If Resolute can get Bibiani into production, complete the Ravenswood extension without issue and just keep doing what they are doing I can see a triple from $1 in the next 12-18 months if the AUD gold price remains steady.

Based on my previous revenue forecast I have revised my numbers based on the latest quarterly and increase in price of gold in the last month. As you can see Resolute has significant cash flow for a company with a market cap just 1.5x revenue with a 32% profit margin and growing – and if you minus cash and bullion on hand as well as gold in circuit, they are “cheap as chips” my good old bearded friend would say. 😉

My recommendation is a STRONG BUY.

[I’m not a financial advisor or an accountant. My views may be flawed, costly and inefficient. This is my perspective on my own trading method. Consult a financial professional to attain the best solution for you.]

| The Speculator

1 Comment

  1. Anonymous

    Another excellent post. Thanks. One of my fav stocks at the moment. Still accumulating/trading this. Just not sure how low it’s going to go with the Van Eck rebalance.

    Reply

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