Ramelius Resources Limited

RMS Details

Updated Resources Statement: Ramelius Resources Limited (ASX: RMS) is engaged in gold production, sale, mine development and exploration. On 10 September 2021, RMS updated the total mineral resources to be 110 Mt for 5.4 Moz of gold and the total Ore Reserves to be 17 Mt for 1.1 Moz of gold. As a result, the mineral resources increased by 15% as of 30 June 2021. RMS obtained these results from the exploration drilling and resource additions at the Edna May, Galaxy, Eridanus, gold projects in Western Australia.

FY21 Key Takeaways:

• Production Growth: The company reported an increase of 18% YoY in gold production to 272,109 ounces in FY21.
• Increase in Revenue: RMS posted revenue of $634.3 million in FY21, up by 38% YoY from its ordinary activities.
• Rise in NPAT: The company generated $126.78 million (up 12% YoY) of net profit after tax versus $113.4 million in FY20.
• Higher Liquidity: The company reported an increase of 45% YoY in the net cash and bullion to $234.0 million in FY21.
• Final Dividend: RMS reported a fully franked final dividend of 2.0 cents per share (cps), payable on 4 October 2021.

Revenue & Net Income from FY20-FY21; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Impact: The company faces the impact of lockdowns, border closures in Australia on its operations, labour mobility and availability within states and overseas, wage pressure.
• Gold Price Volatility: RMS faces gold price fluctuations which may impact the margins and profitability of the company.

Outlook:

• RMS expects gold production to be in the range of 260,000 – 300,000oz at an AISC of A$1,425 – $1,525/oz for FY22.
• The company has commenced works on the Penny Gold mine in the March 2021 quarter. RMS will commence the open-pit mining in Q1FY22 and underground development in the 2HFY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of RMS gave a negative return of 25.52% in the past three months and a negative return of 6.06% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.180 - $2.530. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers’ average, considering improved financial performance, higher liquidity, and fully repaid borrowings in FY21. For the purpose of valuation, few peers like Regis Resources Limited (ASX: RRL), Calidus Resources Limited (ASX: CAI), St Barbara Limited (ASX: SBM), and others have been considered. Considering the current trading levels, improved financial results in FY21, updated mineral resources, valuation, decent production outlook and development of Penny and Tampia gold mines in FY22, we give a ‘Buy’ rating on the stock at the current market price of $1.415 as on 10 September 2021, 2:32 PM, (GMT+10), Sydney, Eastern Australia.  

RMS Daily Technical Chart, Data Source: REFINITIV 

Resolute Mining Limited

RSG Details

Early Voluntary Debt Repayment: Resolute Mining Limited (ASX: RSG) is a gold mining company operating multiple long-life, high-margin assets, including the Syama gold mine in Mali and the Mako gold mine in Senegal.

• Recently, RSG repaid an additional US$30 million debt ahead of time on its Revolving Credit Facility (RCF) from the initial sale proceeds of the Bibiani Gold Mine.
• RSG has paid US$50 million of voluntary repayments in FY21, thereby reducing the RCF balance to US$100 million.
• The company will repay the first scheduled debt payment under the Term Loan Facility at the September 2021 end and will fund it from the cash flows.

Highlights of the Presentation in Africa:

• The company repaid US$29.7 million debt, including US$20.0 million voluntarily and before time during 1HFY21.
• RSG sold Bibani gold mine to Asante Gold Corporation for US$90 million and has received US$30 million cash initially. It will receive US$30 million each in another six months and twelve months.

1HFY21 Results:

• Gold Production Down: RSG reported 163,118 ounces of gold in 1HFY21 versus 217,946 ounces in 1HFY20 due to lower oxide production at the Syama mine and the open-pit cutback at the Mako mine.
• Higher Realised Prices: RSG recorded gold sales of 151,503oz in 1HFY21 versus 212,668oz in 1HFY20. The average realised price of US$1,723/oz in 1HFY21 was higher than $1,427/oz in 1HFY20.
• Rise in Net Loss: RSG registered a net loss of US$219.8 million in 1HFY21 versus net profit after tax of US$36.29 million in 1HFY20.
• A Decline in Net Debt: The company reported fall in net debt to US$219.8 million as of 30 June 2021 from the US$230.4 million as of 30 June 2020.
• Increase in Net Operating Cash Flows: RSG generated US$39.98 million of net operating cash flows in 1HFY21 versus US$11.20 million of net operating cash outflows in 1HFY20.

 Net Operating Cash Flows from 1HFY20 to 1HFY21; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Impact: The pandemic can impact the firm’s operations and cause temporary suspension of mining activities or operations with limited labour.
• Forex Changes: RSG faces forex headwinds given its business operations in South Africa.

Outlook: The company has provided gold production guidance in the range of 315,000-340,000 oz at an AISC of US$1,290-US$1,365 ounces, inclusive of corporate overheads for FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of RSG gave a negative return of 23.21% in the past three months and a negative return of 30.08% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.415 - $1.050. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average, considering its lower production, revenue, and increased net loss in 1HFY21 and the risks associated with the pandemic, labour movement, and forex changes. For the purpose of valuation, few peers like Perenti Global Ltd (ASX: PRN), OceanaGold Corp Limited (ASX: OGC), Perseus Mining Ltd (ASX: PRU), and others have been considered. Considering the current trading levels, decrease in net debt in FY21, higher net operating cash flows in FY21, valuation, and associated risks of COVID-19, forex and regulatory changes, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.430 as on 10 September 2021, 11: 14 AM, (GMT+10), Sydney, Eastern Australia.

RSG Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.