Monsters of Rock: Is this downtrodden African gold miner finally coming good?
It’s been several years since Resolute Mining (ASX:RSG), one of the longest-serving gold stocks on the ASX, was in the good books of investors.
You’ve got to go back to 2018 for its last dividend under former boss John Welborn, and it has since been surpassed as the top West African gold exposure on the ASX by Perseus Mining (ASX:PRU) and West African Resources (ASX:WAF).
It’s not looking that bright yet, and the word dividend makes not one appearance in the Syama and Mako gold mine owner’s half-year results today.
But the $700 million market cap gold miner, up some 68.5% year to date and listed in both Australia and London, is looking a damn sight healthier than it has in years.
Revenue over the first half of 2023 rose just 3.7% to $329.5m on gold sales of 173,058oz at an average realised price of US$1906/oz, but earnings rose 29% to $101.4m, with operating costs down 5% – rare in this day and age, and partly helped by a one-time, non-cash benefit of $16.4m from a tax exoneration in Senegal.
All in sustaining costs of US$1469/oz were a biggy, with capex of $36.7m also tracking below full year guidance of US$88m.
But the biggies are the following: Profits swung from a net loss of US$24.1m last year to positive USS87.7m, while net debt has fallen to $17.2m, with $85.7m in the bank.
For 2023 production and cost guidance has been set at 350,000oz at US$1480/oz, with further growth on the horizon with an expansion of the Syama mine sanctioned that from H1 2025 is expected to boost production to over 250,000oz and bring down costs by US$200/oz at a costs of just US$52m.
“The first half of 2023 has again demonstrated continued positive momentum across all operations keeping Resolute on track to meet its full year guidance and longer-term growth plans,” RSG CEO Terry Holohan said.
“The Company remains focused on further cost savings and stability of gold production over the second half of the year.
“Moreover, we are confident our cost-reduction initiatives, including the monetising of working capital, will be realised.”
The aforementioned Perseus and WAF were among the strong gainers across the gold space today, marking a solid Wednesday for the West African gold set.
Always keen to tell the market why the African discount has led to them being undervalued against their peers, Perseus is among the strongest candidates for that classification.
According to Morningstar analysis, its fair value is $2.32, well above the $2.3b stock’s current level of $1.72.
It’s so far uninspired foray into Sudan aside, timed just ahead of the country’s Civil War, Jeff Quartermaine-led Perseus continues to score goals at its Obikan mine in Ghana and Yaoure and Sissingue projects in Cote d’Ivoire.
At Yaoure, Perseus today announced an increase in underground reserves of 300,000oz, taking its total underground reserve to 4.9Mt at 3.51g/t for 559,000oz.
That is alongside open-pit reserves of 11.8Mt at 1.49g/t for 565,000oz all outside the main CMA open pit, with an updated life of mine plan for Yaoure due in the September quarter.
The whole project contains some 2.8Moz in resources, most of them in the indicated category, though much is lower grade than the more than 4g/t, 976,000oz CMA underground.
Quartermaine says there is plenty of more to be found, with the CMA underground extending only for 400m below the base of the open pit, with more drilling required.
“However, based on what we have seen to date, we are optimistic that once established, the underground operation at Yaouré will continue for many years into the future,” he said.
“The Yaouré underground mine is Perseus’s first foray into underground mining, with all previous operations having been open-cut operations.
“While this represents a new style of mining and a new challenge for us as a company, it is certainly not new to many of the technical staff that are currently employed by Perseus who are very keen to demonstrate their skills in an underground mining setting.
“This depth of talent within our existing ranks gives us every confidence that the Yaouré Underground operation, when it commences, will be every bit as successful as the open-pit operation that has preceded it.”
West African meanwhile said drilling results, including 20.5m at 4.1g/t gold had confirmed the potential to develop a second underground deposit at its Sanbrado mine in Burkina Faso beneath its M5 South pit. An underground scoping study is due in the December quarter.
“Higher-grade underground feed from M5 south is expected to displace lower-grade open-pit mineralisation boosting gold production from Sanbrado following the completion of open-pit mining at M5 South in 2024,” exec chair Richard Hyde said.
“WAF’s unhedged Mineral Resources and Ore Reserves stand at 12.6 million ounces and 6.4 million ounces of gold, respectively. West African is on track to become a +400,000 ounce per annum gold producer with the development of our second gold mine at Kiaka.”
“Our unhedged 10-year production outlook estimates production of more than 200,000 ounces of gold per annum in 2023 and 2024, and more than 400,000 ounces of gold per annum from 2025 to 2032.”
The gold sub-index rose 0.94% today against a broader 1.33% gain for the materials sector powered by higher iron ore prices.