Resolute Mining Limited

RSG Details

 Sanctions Imposed by ECOWAS: Resolute Mining Limited (ASX: RSG) is a developer and operator of gold mines in Australia and Africa. It operates the Syama gold mine in Mali and the Mako gold mine in Senegal in Africa. In an operational update on 11 January 2022, RSG informed the market regarding the economic sanctions imposed by ECOWAS (Economic Community of West African States) in the state of Mali on 9 January 2022. RSG is keeping a close watch on the developments in Mali and continuing operations at the Syama mine as normal as of now.

Lapse of Performance Shares: On 23 November 2021, RSG ceased ~1.123 million performance shares due to the lapse of conditional right to shares. The announcement was made recently on 5 January 2022.

Macquarie Conference Presentation Highlights:

• The average realised gold price for YTD2021 stood at ~US$1,728 per ounce. The production at the Syama mine for Q3FY21 (ended 30 September 2021) was steady. RSG reported 34,206oz production from the Syama sulphide operations in Q3FY21 versus ~33,463oz in Q2FY21.
• The gold production from the Mako mine was consistent as expected and in line with the planned cut back operations during the September 2021 quarter.
• RSG sold the Bibiani gold mine to Asante Gold Corporation (Asante) for ~US$90 million cash consideration in Q3FY21.
• RSG has made strategic investments in OrcaGold, Oklo Resources Limited, Loncor Resources Inc, etc. to avail of potential medium-term growth avenues.

Q3FY21 (30 September 2021) Results:

• The gold sales increased from US$68,103oz in Q2FY21 to US$89,326oz due to the higher average realised price of gold, up by 1% QoQ in Q3FY21.
• The net debt reduced by ~US$6.9 million to ~US$212.9 million as of 30 September 2021.
• RSG reported high-grade sulphide gold intersections from the drilling program at the Tabakoroni underground. It also received positive results from the oxide exploration at the Syama North.

Key Metrics, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces changes in the gold price and production volumes, wet weather conditions, regulatory delays and restrictions, and persistent COVID-19 uncertainty.

Outlook:

• The company plans to continue drilling at the Tabakoroni underground to increase the mineral resources for re-estimation.
• The production guidance for FY21 is maintained at ~315,000oz - 340,000oz at an AISC of $1,290/oz to $1,365/oz.
• RSG has scheduled a planned seven (7)-day shutdown in February 2022 to finish the routine maintenance activities. The improved systems and processes are expected to enhance the efficiency of the Syama sulphide processing circuit and production at Syama.

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 ~24.17% in the past three months and a negative return of ~44.35% in the past six months. The stock is currently trading closer to its 52-weeks’ average price level band of $0.335 - $0.790 The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/Sales multiple, considering the wet weather impact on mining, the higher AISC in Q3FY21, and the recently imposed economic restrictions in Mali. For this purpose of valuation, few peers like Westgold Resources Limited (ASX: WGX), Dacian Gold Limited (ASX: DCN), Focus Minerals Limited (ASX: FML) have been considered. Considering the low trading levels, increase in gold sales, the planned improvements for Syama operations, net debt repayments in Q3FY21, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.345, as of 13 January 2022, 12:17 PM (GMT+10), Sydney, Eastern Australia.

RSG Daily Technical Chart, Data Source: REFINITIV  

Tribune Resources Limited

TBR Details

 Q1FY22 (ended 30 September 2021) Highlights: Tribune Resources Limited (ASX: TBR) is involved in the exploration and production activities at the EKJV (East Kundana Joint Venture) tenements. The gold projects consist of the Diwalwal project in the Philippines and the Japa project in Ghana.

• EKJV Tenements: The Raleigh underground mine remained under care and maintenance. The gold production from the Rubicon-Hornet-Pegasus underground mine stood at ~16,216 oz in Q1FY22 versus ~22,859 oz in Q4FY21 with TBR entitled to ~5,959 oz (36.75% share) for the quarter. The quarterly gold production was lower than EKJV’s forecast by ~6,737oz.
• Ghana Project: Tribune Resources (Ghana) Limited conducted diamond core (DC) and reverse circulation (RC) drilling at the Adiembra resource. It drilled ~6,078 metres (51 holes) in the September 2021 quarter.
• Financial Update: The cash receipts received from customers rose by ~$270k to ~$36.83 million in Q1FY22. The production costs were reduced to ~$17.7 million in Q1FY22 compared to ~$20.5 million in Q4FY21.
• Liquidity Status: TBR held ~$6.961 million cash and cash equivalents as of 30 September 2021 versus ~$4.163 million as of 30 June 2021.

Key Financials, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of exploration and mining, labour shortage, COVID-19 protocols, and regulatory hurdles on the projects.

Outlook:

• TBR focuses on the infill and extensional drilling at the defined Adiembra resource (Ghana) to expand the inferred resources and unclassified mineralisation for future reserve estimation.
• The production outlook from the EKJV tenements for Q2FY22 is like the production in Q1FY22.

Stock Recommendation: The stock of TBR gave a negative return of ~0.424% in the past three months and a positive return of ~3.271% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $4.600 - $6.480. On a TTM basis, the stock of TBR is trading at a price to book value multiple of 1.0x lower than the industry (Metals & Mining) median of 2.7x, thus seems undervalued. Considering the low trading levels, the decline in total debt, decline in production costs, improved liquidity status, and net operating cash inflows, continued exploration at the Adiembra resource for estimation, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $4.700, as of 12 January 2022, 10:45 AM (GMT+10), Sydney, Eastern Australia.

TBR Daily Technical Chart, Data Source: REFINITIV 

Brightstar Resources Limited

BTR Details

 Activities & Results of Q1FY21 (ended 30 September 2021): Brightstar Resources Limited (ASX: BTR) is a gold developer based in the Laverton region of Western Australia. It operates three key development projects of Cork Tree Well, Beta, and Alpha.

• CTW Project Drill Program: The company undertook exploration and development work at the CTW (Cork Tree Well) project in Q1FY21. BTR initialised the 12,000 meters of reverse circulation (RC) drilling program and completed the drilling of 24 holes (~3,430 meters) in Q1FY22 which is nearly one-fourth of the total program and ahead of the planned schedule.
• Asset Review: The company reviewed current portfolio assets with a special interest in the remaining resource and potential for upgrades in the future.
• Data Collection: BTR collated extensive available historical drill data of lease holdings in one database. It is progressing with the data validation to a single legend and will add further drill digital datasets to help exploration programs.
• EIS Application: BTR applied for co-financing as per an EIS (Exploration Incentive Scheme) for RC and diamond drilling program at Sailor Prince (E38/4433) to effectively test multiple element dispersion systems at the historical location.
• Funds Raising: BTR undertook a ~$2.3 million placement to carry out the exploration activities at the Laverton Project comprising the CTW drilling, further exploration programs, and working capital.
• Cost Control: Transformative activities and cost reduction review has been undertaken to conserve funds for exploration activities and the implementation of the JORC Resource growth strategy.
• BTR held cash and cash equivalents as of $272K as of 30 September 2021.

Net Income Increase, Highlights; (Analysis by Kalkine Group)

Key Risks: The company is in the early-stage exploration stage at the projects, hence, risks gold discovery and ore estimation. Government regulations, COVID-19 uncertainty, and restricted labour movement continue to pose a business risk.   

Outlook:

• The company is progressing on exploration and development on its projects (Cork Tree Well) to estimate and contribute to its JORC resource estimation strategy.
• BTR intends to meet the DMIRS (The Department of Mines, Industry, Regulatory, & Safety) to ascertain the timeframe and construe a plan for permitting requirements on the CTW project in line with its near-time production plan.

Stock Recommendation: The stock of BTR gave a positive return of ~114.28% in the past six months and a positive return of ~81.81% in the past nine months. The stock is currently trading above the 52-weeks’ average price level band of $0.024 - $0.077. The stock of BTR has a support level of ~$0.055 and a resistance level of ~$0.074. On a TTM basis, the stock of BTR is trading at a price to book value multiple of 13.6x higher than the industry (Metals & Mining) median of 2.7x, thus seems overvalued. Considering the current trading levels, significant returns in the past six months, and the past nine months, valuation on a TTM basis, and associated key business risks, we suggest investors book profit and give a ‘Sell’ rating on the stock at the current market price of $0.062, as of 13 January 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

BTR 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.

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