AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
The coronavirus outbreak has jolted the market, and the risky assets are facing pressure in the wake of prevailing negative sentiments across investors and speculators. While the risky assets are under pressure, gold is shining brighter than ever as investors are now hedging their portfolio with the safe haven, which is further propelling the ASX gold stocks.
Gold spot is now at a record high with prices reaching to the level of $2,561.99 (intraday high on 24 February 2020) from its recent low of $2,157.55 (intraday low on 1 January 2020), which underpinned a price appreciation of over 18.74 per cent. The turmoil concerning coronavirus is now putting the demand for consumption-based commodities in peril and fuelling the gold price.
The appreciating gold and weaker dollar are anticipated by many industry experts to boost the earnings of the ASX gold mining companies, which would also be supported by the higher realised price on the sales.
The glittering high prices and the zest to lock in the future benefits are now prompting the ASX listed gold mining companies to consider the moneyness of their prospect and develop inventories fast to hedge or secure the future earnings.
Ramelius Resources Limited (ASX:RMS)
- Financial and Operational Highlights
RMS reported its interim report for the first half of the financial year 2020, which ended on 31 December 2019, and reported the performance and development across its gold prospects.
The Company generated a sales revenue of $158.5 million, which remained ~ 12.86 per cent lower against its previous corresponding period (or pcp). RMS mentioned that the preliminary reason behind the fall was production variances from Edna May and the timing of gold sales.
The sales decreased by 47 per cent against pcp from Edna May, while there was just a unit per cent increase against pcp in the Mt Magnet gold sales.
While the production fell, the cost of production also responded in tandem and declined by 27 per cent against pcp to stand at $122.17 million.
RMS expensed a ~ 303.53 per cent higher income tax against pcp which stood at $9.12 million as compared to the income tax expense of just $2.26 million (in the pcp); however, the Company suggested that the application of AASB 16 resulted in the allocation of depreciation of right of use asset expense ($6.23 million) under the income tax line item.
Post adjusting the expenses and income tax, RMS reported an NPAT from continuing operations of $20.49 million, which remained ~ 329.55 per cent higher against pcp.
The drop in production was largely offset by a higher average realised price on gold sales. RMS realised an average gold price of $1,844 per ounce during the period, which remained 10 per cent higher against pcp.
The sales remained a mix of spot and forward contracts with the average spot price being $2,164 per ounce and the average price of deliveries into the hedge book of $1,793 per ounce.
- Liquidity Position
The cash flow from operations stood at $163.26 million, which remained down by 10.73 per cent against pcp, which post adjusting with operational cash outflows resulted in net cash of $54.35 million, down by 13.15 per cent against pcp.
The reason for the decline in operating cash was lower sales volume, which as per the Company was somewhat indemnified by lower cash operating expenditures. Also, there was a significant change in the inventory levels, reflecting a swing of $34.5 million.
Gold and Ores Inventory Swing (Source: Company’s Report)
At the end of the period on 31 December 2019, RMS held forward gold sales contracts of 239,150 ounces of gold at an average price $1,943 per ounce over a period to May 2022, reflecting an 11 per cent increase in the average price of the hedge book.
- Development Expenditure
RMS invested $78.9 million in the development of the future long-term mine, out of which $51.2 million was assigned to the mine development for Mt Magnet open-pit & underground mine development along with the development at Edna May and Marda Gold prospect.
Out of total development expenditure, RMS expended $14.4 million across property, plant and equipment, mostly related to the Marda Gold project, $7.9 million on exploration and evaluation, and $6.6 million on the acquisition of 4.9 per cent of Spectrum Metals Limited (ASX:SPX).
RMS kept the FY20 production and cost guidance of 205-225k ounces of gold with an all-in sustaining cost (or AISC) of $1,225-$1,325 per ounce.
The stock of the Company last traded at $1.405, down by 3.436 per cent on 25 February 2020, against its previous close on ASX.
Westgold Resources Limited (ASX:WGX)
- Financial and Operational Highlights
WGX recently reported the performance of half-year for the period ended 31 December 2019, which reflected some decent results.
WGX generated a revenue of $228.85 million, which remain ~ 18.20 per cent higher against pcp. The higher revenue resonated further to a gross profit of $9.30 million, which remained significantly up against the gross loss of $17.10 million reported by the Company in the pcp.
WGX reported a net profit of $9.75 million during the period, which resulted in an EPS of 2.46 cent a share.
The Company managed to produce 120,127 ounces of gold, up by 17 per cent against pcp, while also managed to bring down the cash cost and AISC slightly.
The cash cost for the period stood at $1,236 per ounce, down by 8 per cent against pcp, while the AISC fell by $5 against pcp to stand at $1,480.
Performance Snippet (Source: Company’s Report)
The Company processed 1.79 million tonnes of ore during the period, up by ~ 6.84 per cent against pcp, while the head grade stood at 2.35g/t, up against the head grade of 2.18g/t in 1H FY2018 (pcp).
The higher gold price coupled with a higher average realised price on the gold sales underpinned a ~ 18.20 per cent increase in the revenue. WGX realised an average gold price of $1,968 per ounce, which remained ~ 14.61 per up against pcp.
The operational metric of various prospects is as below:
Source: Company’s Report
The significant capital investment at CGO during the period was required to re-establish the Big Bell, which is the largest mine for the Company, to support the long-term production. Also, the commencement of a third underground mine at MGO (Bluebird Mine) and the pre-stripping of open pits in the Meekatharra North area consumed considerable working capital.
- Liquidity Position
WGX generated net cash of $54.39 million from the operational activities, which remained substantially up against the net cash of $2.28 million generated by the Company from the operating activities in the previous corresponding period.
Post adjusting with the net cash outflow in investing and finance activity, WGX reported cash and cash equivalent of $47.97 million for the period ended 31 December 2019.
- Development Expenditure
Cash flows used in investing activities totalled $80,606,854, which remained up against the pcp figure of $64,265,579, as it included the flow through of capital equipment for the internal mining services division.
The investment change across each prospect of the Company against the pcp is as below:
MP&D- Mine Properties & Development, E&E- Exploration & Evaluation, P&E- Plant & Equipment (Source: Company’s Report)
As per the Company, the half-year results demonstrated a substantial improvement in financial outcomes against the pcp. The mining segments of Meekatharra Gold Operations (MGO) and Fortnum Gold Operations (FGO) were strongly profitable while the Cue Gold Operations (CGO) performance reflects the development phase prior to the transition to steady-state operations.
The stock of the Company last traded at $2.460, down by 1.992 per cent on 25 February 2020, against its previous close on ASX.
