Resolute Mining Limited

RSG Details

Recent Business Update: Resolute Mining Limited (ASX: RSG) is a gold mining company that operates multiple long-life, high-margin assets, including the Syama Gold Mine in Mali and the Mako Gold Mine Senegal. On 14 December 2021, L1 Capital Pty Ltd, one of the company’s shareholders, ceased to be a substantial shareholder by disposing of 17.479 million shares.

September 2021 Quarterly Performance

• Production Status: Quarterly gold production stood at 76.336 ounces, marginally down by 1% from the previous quarter. All-in Sustaining Cost (AISC) stood at US$1,499/ounce, affected by increased rainfall at Syama, planned cut-back in Mako, and drawdown of higher cost stockpiles.
• Sales Update: Gold sales stood at 89,326 ounces, substantially up by 31% QoQ, at an average realised gold price of US$1,738/ounce, marginally up by 1% from the previous quarter. However, the average realised gold price remained below the spot price of US$1,791/ounce.
• Financial Position: Cash and bullion, as of 30 September 2021, stood at US$41.6 million. US$53.6 million debt repayments led to a shredded net debt of 212.9 million. During the period, RSG sold Bibiani Gold Mine for US$90 million in cash with an initial payment of US$30 million.

Quarterly Operating Summary, Analysis by Kalkine Group

Key Risks and Challenges

• Unfavourable External Factors: AISC remained substantially higher relative to the prior quarter due to wet weather conditions, stripping campaign, and continued blending of the low-grade high-cost stockpiles.
• Hedging Requirements: Due to high price volatility in gold, prudent hedging strategies are required. However, hedging is a high-cost activity that needs separate management.

Outlook

• Tabakoroni Underground: The ongoing resource drilling program in Mali at Tabakoroni Underground has continued to offer good results, complemented by high-grade sulphide gold intersections.
• Reduced Financial Leverage: The US$30 million initial instalments of the sale of Bibini Gold Mine has substantially reduced the financial leverage.
• Operational Support: The deferral of the planned shutdown of the sulphide processing circuit and substantial progress in the on-site vaccination program shall deliver improved operating capacity.

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 ~54.491% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.335 - $0.870. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, considering the high cost of hedging and uncertainty of wet weather conditions. For valuation, a few peers like Regis Resources Ltd (ASX: RRL), Perenti Global Ltd (ASX: PRN), Jervois Global Ltd (ASX: JRV) have been considered. Considering the sequential improvement in gold sales, favourable update on Tabakoroni Underground, and reduced financial leverage, high volatility in the metals and mining industry, and upside indicated by valuation, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.375, down by ~3.847%, as of 04 January 2022.

RSG Daily Technical Chart, Data Source: REFINITIV

Tempus Resources Limited

TMR Details

Q1FY22 Performance Update: Tempus Resources Limited (ASX: TMR) is engaged in gold exploration with Australia, Canada, and Ecuador projects.

• Potential New Gold Vein: During the intersection of drill hole EZ21-12 with 1.0m quartz at Elizabeth, TMR identified a potential new gold vein, namely ‘Blue Vein’, determined at 150m north-west of the south-west Vein at Elizabeth.
• Core Drill Holes Completion: 17 core drill holes were completed at Elizabeth for circa 5,200 meters during the quarter. Visible gold was identified in EZ21-02, EZ21-04, and EZ21-12.
• Resource Estimation: A review of the previous metallurgical test done at Elizabeth validates that the high-grade gold mineralisation is not refactory; hence, it can be processed by utilising the existing Blackdome mill circuit.

September Quarter Cash Flow, Analysis by Kalkine Group

Key Risks and Challenges

TBR is highly exposed to exploration risks in gold mining and is subject to adequate exploration funds, timely project commercialization, and the accuracy of resource estimation.

Outlook

In 2020, TBR drilled 5,000 meters at Blackdome. Further drilling is planned in CY22 following an alteration study highlighting the potential for discoveries. 2022 drilling is expected to test the along-strike extensions and down plunge of the new Blue Vein, south-west Vein, and other vein targets. Permissions are underway for the underground drilling via the Lower Portal access.

Technical Commentary: After witnessed a selling pressure from the higher levels. Currently, TMR stock prices are hovering near the horizontal trendline support level and sustaining above the same. The momentum oscillator RSI (14-period) is trading at ~47.26 level, reversing from the lower levels. An important support level for the stock is placed at AUD 0.098 while the key resistance level is placed at AUD 0.15.

Stock Recommendation

The stock of TMR gave a negative return of ~31.429% in the past three months and a negative return of ~29.412% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.105 - $0.310. Considering the low trading levels, marginal debt profile, favourable assay results from the Blue Vein drill hole, positive exploration findings on the Blackdome gold project, technical levels mentioned above, and associated key risks of the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.120, as of 04 January 2021.

TMR Daily Technical Chart, Data Source: REFINITIV

 Note: The purple line reflects the RSI (14-day period)

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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