Berenberg Equity Research has retained its buy recommendation for Resolute and expects the companys shares to rerate as it continues to increase and optimise production at Syama, with the balance sheet de-gearing.
The following is an extract from Berenbergs research update:
Q2 operational update: beat at Mako and Syama oxide
- Operational beat at Mako and Syama oxide: Resolute has announced Q2 gold production of 107.2koz at an AISC of USS1,033/oz. This was a beat versus our expectation of 100.5koz. Mako produced 43.478koz, versus our expectation of 39.8koz, with the driver being higher grade. The Syama sulphide circuit produced 35.2koz with overall recoveries of 80%. While production was an incremental miss versus our expectation of 37.2koz due to grade and throughput, recoveries were higher than the 77% we forecast and are guided to remain above 80% for the rest of the year, which we view as a positive. The oxide circuit produced 28.5koz, a beat versus our expectation of 23.5koz, with the driver being grade. Management has maintained guidance of 430koz for the year at an AISC of USD980/oz with no material impact from COVID-19. We expect production of 424koz at an AISC of USD954/oz.
- Tabakoroni sulphides PFS and power upgrade project on track: The completion of the Tabakoroni sulphide pre-feasibility study (PFS) remains on track for completion in Q3 and the development of the hybrid power plant is also progressing on track with the completion of earthworks and commencement of civils. Mechanical and electrical installation should commence over the next quarter and ultimately the project should deliver a 40% reduction in power costs to below USD0.15/kWh.
- Net debt up qoq on working capital and capex: Cash and bullion at the period end was USD88m, with listed investments of USD35m and promissory notes (relating to Ravenswood) of USD35m. Period-end cash beat our USD51m, driven by lower-thanmodelled debt repayments offsetting higher working capital movements and capex; net debt of USD220m was up slightly qoq (from USD212m) and was above our USD195m, and we would expect this to decrease in H2 as i) out-of-the-money hedges roll away and ii) working capital builds are released. The company retains a USD45m undrawn revolving credit facility. Gold in circuit inventories reduced by 3.6koz qoq, but still stands at 2.5koz (USD146m market value). The VAT dispute wiRead More – Source