Resolute Mining Limited

RSG Details

Update on Syama Sulphide Circuit: Resolute Mining Limited (ASX: RSG) is in the business of gold mining, development of resource projects, prospecting and exploration for minerals. The company recently announced that the repair program for sulphide roaster at Syama Gold Mine is on schedule and is within the budget. The company is expecting roaster to be fully operational by early to mid-December, with initial estimated total costs of the roaster repairs of US$5 million.

In October 2019, despite the downtime, the company managed to pour more than 42,000 ounces of gold.The company also announced that the Queensland Government has approved and issued a new Environment Authority Permit relating to the company’s Ravenswood Gold Mine, which will allow RSG to expand the existing Nolans Tailing Storage Facility (NTSF) and to ultimately proceed with in-pit tailings storage. The EGM of the company is to be held on 21 November 2019. 

Significant Rise in EBITDA: September 2019 marked a successful quarter for the company. Despite the unscheduled maintenance of Syama Roaster, the company produced more than 100,000 ounces of gold in the September quarter. Mako Gold Mine, a strong cashflow generative asset, surpassed budgeted tonnages, grades and recoveries and produced 44,191 ounces of gold for the company. During the quarter, the company reported cash, bullion and listed investments of $179m and made gold sales of 127,265oz at an average gold price of US$1,362/oz.  For the first half of 2019, revenue of the company went up by 33% to $324 million from $243 million in H1 FY18 and reported a rise of 171% in Earnings before Interest, Taxes, depreciation and Amortisation (EBITDA) to $78 million from $29m in H1 FY18.


EBITDA Profile (Source: Company Reports)

What to Expect: The company plans to offset the lost production from the Syama sulphide circuit by processing oxide material through the sulphide circuit carbon in leach (CIL) infrastructure. RSG expects to produce 400,000oz of gold with AISC (all-in sustaining cost) revised to US$1,020/oz from US$960/oz. The December 2019 quarter will see the suspension of operations at Mt Wright at Ravenswood, and the commissioning of the third ball mill.

Stock Recommendation:As per the ASX, stock of RSG generated a return of 19.17% in the last one year and produced a negative return of 4.56% in the last one month. The stock is trading close to its 52-week low of $0.910, proffering a decent opportunity for accumulation.EBITDA margin of the company showed an improvement over the first half of the year and increased from 9.8% in December 2018 to 24.1% in June 2019. Net margin of the company stands at 12%, higher than the industry median of 10.6%. This indicates that the company is efficiently managing its costs and is capable of converting its revenue into profits. Thus, considering the trading levels, higher margins and decent outlook of the company, we recommend a “Buy” rating on the stock at the current market price of $1.105, down 3.913% on November 18, 2019.

 
RSG Daily Technical Chart (Source: Thomson Reuters)
 

OceanaGold Corporation

OGC Details
OGC Intersects Additional High-Grade Mineralisation: OceanaGold Corporation (ASX: OGC) is a gold mining company with significant global experience. The company is on track for 55km of drilling with respect to Project Martha. As on November 18, 2019, the market capitalisation of the company stood at ~$2.15 billion. OceanaGold Corporation recently updated about that the intersection of the additional high-grade gold and silver mineralisation during its extensive resource definition drilling along with the East Graben vein at the company’s WKP prospect in NZ.
Financial Highlights: For the nine months ended September 30, 2019, the company generated $499.1 million in revenue, including $133.6 million in the third quarter. YTD revenue decreased over the same period in 2018 due mainly to lower sales volumes from Didipio. The company produced 107,748 ounces of gold and 2,316 tonnes of copper in the third quarter. EBITDA of the company went down to $34 million in the third quarter from $71 million in Q2 2019. This resulted in the decline of operating cash flow from $86 million to $33 million.
 
Financial Performance (Source: Company Reports)

What to Expect: The company expects operational improvements to continue at Haile. The company stated that Q4 AISC is expected to be lower with the higher production at Macraes and Haile. RSG also anticipates growth from continued advancement of the Martha Underground development and through extensive exploration drilling across the operational footprint.

Stock Recommendation: As per the ASX, the stock went down by 18.44% in the last six months and gave a negative return of 9.69% in the past one month. At the end of September 2019, EBITDA margin of the company stands at 26%, higher than the industry median of 5%, indicating stability in earnings. Debt/Equity multiple of the company stands at 0.13x, lower than the industry median of 0.18x, implying that the company is financially stable. Taking into consideration of current trading levels, decent financial ratios and aforesaid factors, we recommend a “Buy” rating on the stock at the current market price of $3.030, down by 12.174% on November 18, 2019. The correction was probably witnessed primarily due to the unfavourable sentiments with respect to the gold sector.
 
 
OGC Daily Technical Chart (Source: Thomson Reuters)

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