Resolute Mining Limited (ASX: RSG)

Positive mineralisation update from Tabakoroni with boost from macroeconomic factors: Resolute, a successful gold miner with more than 25 years of continuous production has operated nine gold mines across Australia and Africa which have produced 8 million ounces of gold. The Company recently announced further exceptional drilling results from the ongoing exploration program at the Tabakoroni Project, which was 35km south of the Syama Gold Mine in southern Mal. Syama is a world-class orebody with enormous untapped potential. The results from Tabakoroni confirmed that the project is a major gold deposit in its’ own right. The Group views Tabakoroni as a significant asset and a long-term source of additional oxide and sulphide material for its Syama processing milling complex. Exploration remains a key focus at Syama and its ongoing drilling programs remain focused on the Nafolo discovery that was adjacent to the main Syama ore body and at the Tabakoroni Project.


Longitudinal projection of the Tabakoroni Main Zone (Source: Company Reports)

Drilling at the Tabakoroni Main Zone initially just concentrated on expanding the previously identified high-grade shoots, but programs last year significantly increased the footprint of the high-grade shoot underneath the proposed Namakan oxide pit. Resolute also entered into an option and joint venture agreement with Chapel International Marketing Ltd (Chapel) in 2003 which provided a right for Resolute to earn up to 60 per cent of Chapel’s 85 per cent interest in the Permit. Previous exploration at Tabakoroni was just focused on identifying oxide resources. Open pit operations at Tabakoroni will commence from mid-year in 2018 with high grade oxide and transitional material to be processed through the 1.5 million tonnes per annum Syama oxide circuit. The stock was down by 7.76 per cent in last one month and by 2.16 per cent in last five days with gold price volatility. Just after the release of the drilling update at Tabakoroni Project, the stock climbed up by 4.425 per cent on May 25, 2018 with support also coming from cancellation of President Trump’s summit with North Korea. However, given the potential, we maintain a “Buy” at the current market price of $1.18.
 

Northern Star Resources Limited (ASX: NST)

Support from Macroeconomic factors: NST’s assets currently produce over 250kozpa each and the group has a track record of paying fully-franked dividends since 2012 with a stated dividend policy of 6 per cent of revenue. It is governed by the strategy of “a business first and a mining company second”. It has a strong growth outlook and is expected that production will grow to 600kozpa in CY2018 and will deliver significant increases in free cash flow. It was reported that over the last 5 years, Northern Star has outperformed at both the ends; US Gold Price and amongst its GDX Indexed Top 50 gold mining listed peers significantly. NST has been able to consistently grow production, resource and reserve life on a per share basis for its Shareholders since 2010.


5-Year Return on Invested Capital (Source: Company Reports)

Its strategy of organic growth generated A$3.36 billion of value for Shareholders since NST’s first gold acquisition in 2010 and only 8 per cent of this value uplift has been from equity raised. This was driven through the Company’s operational excellence and investing heavily into exploration, by growing production, cutting costs and by returning substantial dividends to Shareholders. NST is positioned well to continue to deliver the sector the leading EBITDA margins as compared to its GDX peers. NST’s allocation of capital has been sector leading and the business model has allowed NST to deliver on all fronts and this has led to deliver the sector with the leading returns for its Shareholders. Northern Star is committed to continuing expanding on its specialist underground mining, geology and processing capability, and significant opportunities exist to leverage these disciplines for future growth. In one year, the stock was up by 32.47 per cent but declined by 3.60 per cent in last three months. The stock declined by 4.64 per cent in last five days and recovered by moving up by 1.94 per cent as on 25 May 2018 as Trump’s meeting with North Korea got cancelled impacting the US markets and boosting gold stocks. The stock looks “Expensive” at the current market price of $6.28.

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