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Resolute Mining (ASX:RSG) boosts production, lowers sales

Mining
ASX:RSG      MCAP $894.2M
20 April 2020 12:45 (AEST)

African gold producer Resolute Mining (RSG) mined almost two million tonnes of ore over the March 2020 quarter.

The company released its activities report for the last quarter this morning in which it highlighted record tonnage from its Syama Underground Mine in Mali, West Africa.

From Syama alone, Resolute mined roughly 1.2 million tonnes of ore with an average grade of 2.55 grams per tonne of gold. Of this, 829,175 tonnes were processed with an 82.7 per cent recovery rate. All-in sustaining costs (AISC) for Syama were US$1083 (A$1705) per ounce.

Bolstered production, weakened sales?

The Syama results underpinned a solid quarter of production all ’round.

Altogether, Resolute mined roughly 1.94 million tonnes of ore over the March quarter — seven per cent more than the December quarter of 2019, and more than double the ore production from the March 2019 quarter.

Similarly, Resolute processed roughly 2.11 million tonnes of ore over the March 2020 quarter compared to 1.46 million over the same period the year before.

Interestingly, however, despite recovering and pouring more gold over the last quarter than the same time the year before, Resolute sold less gold than the March 2019 quarter.

Last year, Resolute sold roughly 108,000 ounces of gold at an average price of US$1276 per ounce. This year, the company sold roughly 102,000 ounces at an average US$1407 per ounce.

Nevertheless, with a potential $300 million to hit Resolute’s books from the sale of its Ravenswood Gold Mine, perhaps the company had its manpower spread thin over the last quarter.

In mid-January, Resolute told shareholders it was selling Ravenswood to EMR Capital and Golden Energy and Resources (GEAR) for $100 upfront and an extra $200 subject to the four-year-average price of gold and other conditions.

As such, Resolute Managing Director and CEO John Wellborn said the March 2020 quarter was an important quarter in the life of the company.

“The March 2020 Quarter represents a turning point in our business with record tonnages achieved from the Syama Underground Mine and the completion of the sale of the Ravenswood Gold Mine resulting in a lower cost profile as we focus on our future as an African-focused gold miner,” John said.

Cash still burning

Of course, investors are likely most concerned with Resolute’s cash flow at this point in time.

According to the company, its cash on hand decreased from US$87.4 million (A$137.66) at the end of the December quarter to US$66.3 million (A$104.43) at the end of the March quarter.

While Resolute’s bullion increased in value by US$10.9 million over the March quarter, this still leaves cash flow for the quarter negative.

Nevertheless, John said the company’s core gold projects have scope to improve and exploration results demonstrate the potential for some organic growth opportunities.

“The successful completion of the company’s refinancing activities provides the company with a stronger balance sheet and a simplified capital structure,” John said.

As far as the current COVID-19 crisis goes, Resolute said gold production has been unaffected by the coronavirus and there have been no confirmed cases across any of the company’s sites or offices.

Resolute shares have declined 5.29 per cent today, currently worth 90 cents each in mid-morning trade.

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