Resolute Mining Limited

Partnership with Aggreko to Develop Hybrid Modular Power Station:Resolute Mining Limited (ASX: RSG) is engaged in the business of gold mining, development of resource projects and exploration for minerals. The market capitalisation of the company stood at $1.06 billion as on 29^th November 2019.

Collaboration Details:The company is going to collaborate with Aggreko Plc to develop a new hybrid modular power station at the Company’s Syama Gold Mine in Mali.It will combine one of the best batteries, solar and thermal generation technologies in one integrated power solution, certifying best efficiency, reduced energy costs, and positive environmental outcomes. The project work will commence soon, and the first phase is expected to be operational from December 2020. The new power plant is expected to reduce Syama’s power costs by approximately 40% and carbon emissions by about 20%, once it is fully operational.

Q3FY19 Highlights for the Period ended 30 September 2019: RSG declared its third quarter operating results, wherein, the company reported Gold production at Syama at 45,804 ounces (oz) at an AISC of A$2,224/oz (US$1,523/oz). Total borrowings came in at A$528 million, comprising the US$150 million revolving credit facility, the US$130 million acquisition bridge facility provided by Taurus, US$58m Mako project loan also provided by Taurus, and the net balance of the Company’s unsecured overdraft facility with BDM and in-country receivables.


Q3FY19 Operation Update (Source: Company Reports)

Guidance:  As per the guidance, the company has maintained gold production guidance for FY19 at 400,000 oz of gold at an All-In Sustaining Cost (AISC) of US$1,020 per ounce.The roaster downtime has impacted unit costs for the Syama sulphide circuit for the September and December 2019 Quarters. As a result, the Company has revised its Group AISC guidance from US$960/oz to US$1,020/oz. As per the dividend guidance, the management expects a minimum payout of 2% on Annual Gold Sales.

Stock Recommendation:  The stock of RSG is quoting at $1.155 with a price to earnings multiple of 27.520x. The stock is quoting towards the lower band of its 52-week trading range of $0.910 to $2.120. The stock has generated returns of -31.49% and 3.98% in the last three months and six months, respectively. The stock is available at an Enterprise Value (EV) to sales multiple of 1.3x on next twelve months basis (NTM) as compared to industry median (Basic Materials) of 1.5x. New Syama power plant is expected to deliver power costs, in-line with the Syama DFS Update, and is likely to reduce 40% power costs while significantly reducing the carbon emissions. Considering the aforesaid facts, stock price movement, a recent collaboration with Aggreko Plc, valuations and current trading levels, we recommend a ‘Buy’ rating on the stock at the current market price of $1.155, down 1.702% as on 29 November 2019.

St Barbara Limited

Encouraging Results from Surface SamplingProgram:St Barbara Limited (ASX: SBM) operates in the exploration and marketing of gold from its projects located in Gwalia, Atlantic Gold and Simberi.

Operational Highlights from Horn Island Joint Venture Surface Sampling: As per the operational update, the company reported that anomalous gold in soil and rock chips samples have been returned from surface sampling programs conducted on the eastern part of Horn Island.The business reported a maximum assay result of 215 g/t Au returned from rock chip sampling, with 14 samples returning greater than 1 g/t Au.

Q1FY20 Operational Highlights:SBM announced its operational highlights for the quarter ended 30 September 2019, wherein the company reported a production of 88 koz at an AISC of $1,421/oz as compared to 86 koz at $1,219/oz in Q4FY19.The company reported an increase in total material movement from Gwalia, witnessing the best movement in the last five quarters. Operational cash contribution stood at $43 million during the quarter. The business reported $112 million of debt and $200 million of undrawn debt facility available as on Q1FY20.

Guidance:As per the FY20 production guidance, SBM expects production to be in the range of 380 to 420 koz, at an AISC of $1,240 to $1,330.The company expects FY20 gold production across Gwalia, Australia and Atlantic Gold, Canada to be in the range of 175,000 - 190,000 ounces and 95,000 - 105,000 ounces, respectively.


FY20 Production Guidance (Source: Company Reports)

Stock Recommendation:The stock of SBM is quoting at $2.620 with a market capitalisation of $1.85 billion. The stock has given negative returns of 1.85% and 18.46% in the last one month and three months, respectively. The stock is quoting close to the lower band of its 52-week trading range of $2.43 to $5.152. The stock is trading at a price to book value (P/BV) multiple of 1.5x as compared to the industry median (Basic Materials) of 1.6x. The business registered a gross margin and net margin of 50.2% and 19%, receptively in H2FY19, better than the industry median of 46% and 13.1%, respectively. Considering the aforesaid facts, price movements, trading levels, better margins than industry, upgraded production guidance and valuations, we recommend a ‘Buy’ rating on the stock at the current market price $2.620, down 1.132% as on 29 November 2019.

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