Gold miner Resolute Mining ((RSG)) has garnered attention after delivering an updated Definitive Feasibility Study (DFS) for its Syama Underground mine in Mali.
Overall, the news was good: higher inventories, an extended mine life (to 2032 from 2028); and lower processing unit costs thanks to higher automation and improvements in power strategy.
Reading through stockbroking analysts’ assessments post update, it appears the positives marginally outweigh the negatives: a rise in capital expenditure to fund the automation, and an increase in technical risks implied by a reliance on automation in a remote locality.
The share price jumped 7.5c in morning trade to $1.38 (5.75%) at 11.30am Sydney time in response to the news. Technically, the stock has encountered strong resistance at this level for the past year, although it has been trading gently upward since January.
Large Increase Underground Reserves
Syama’s capital expenditure bill is estimated at $97m – a figure Macquarie says can be funded through cash flow. The pay-off is a fall in underground mine costs of -$US135/oz, taking costs to US$746/oz.
The DFS also outlines a 38% increase in Syama’s underground probable reserves.
The big take-out was Resolute’s potential for further upside, particularly should the company encounter further success with exploration and its potential to achieve higher throughput rates.
Broker Cannacord Genuity says the miner has the capacity to scale up without reducing mine life.
Buy Ratings Galore
Citi, Macquarie and Cannaccord all retained their Outperform/Buy ratings on the stock.
Citi lifts the target price to $1.80 from $1.70, Macquarie increased its target price to $1.50 from $1.40 and Canaccord raised its target price to $1.85 from $1.75.
Resolute Mining owns three operating mines in Africa and Australia and a portfolio of exploration projects in Mali, Australia, Ghana and the Cote D’ivoire.
Resolute’s March-quarter production report proved disappointing so the market will be keeping a keen eye out for the June production figures.
