Resolute Mining Limited (Resolute or the Company) (ASX: RSG) made an announcement regarding the agreement to forward sell an additional 30,000 ounces of gold scheduled to deliver on a monthly basis from the January 2019 to June 2019 at an average price of US$1,250 per ounce.
There is a US$ volatility in the gold price. As a result of this i.e. strengthening of the gold price volatility, Resolute has taken advantage to add to the Company’s US$ gold hedge positions. The purpose of hedging was to mitigate the risk of US$ revenues from Resolute’s Syama Gold Mine in Mali (Syama) during the ramp-up phase of the Syama Underground Mine.
Forward sales of additional 30,000 ounces of gold is made in order to extend the existing US$ hedge positions established to deliver 6,000 ounces per ounce monthly at US$1,330 from September 2017 till December 2018. As per Resolute’s total gold hedge book, as on 29 October 2018 is 115,000 ounces of gold is hedged which includes the gold hedge till 29 October 2018. This represents 26% of the total production of gold over the period.
Mr. John Welborn who is the Managing Director and CEO of Resolute Mining Limited is happy to be a part of Resolute’s success and wish to continue in increasing the sales revenue by increasing the sales of gold using the hedging strategies.
At US, currently the gold prices are highly volatile. So, Mr. John Welborn says that the hedging strategy is a wise decision in order to maintain US$ gold price certainty at these levels during the ramp up phase of the Syama Underground Mine. There is a high exposure of US$ capital and expenditure at Syama Underground mines. The hedging program will bring a level of certainty in regards to the company’s future cashflows as well as the profit from the project. Resolute remains strongly influenced due to gold prices. Its current hedge position represents less than 2% of the gold Ore reserves. As per the hedge books of Resolute, the company has made a forward sold of 115,000 ounces of gold that is hedged at an average price of approximately A$1,756 per ounce (US$1,247 per ounce).
As per the CEO presentation on AGM this Friday 26 October 2018, the company made net profit after tax worth A$78 million. There was a strong shareholders return where dividend of 2.0 cents per share was declared. Syama DFS update delivers more than 300kozpa at US$746/oz. The Ravenswood expansion project delivers 115ozpa at US$823/oz. In the FY18, there was a total gold production of 284,185 oz and total gold sold was 262,381oz at an average price of A$1,703oz. The company generated a revenue of A$446 million from the sales of gold and silver. The NPAT was A$78 million. The ROE was 12%. There was a net cash inflow of A$28.359 million. The major cash outflow from the operating activities was due to payments made to the suppliers, employees worth A$391.955 million. The company made payments for the property, plant and equipment worth A$88.421 million and in development activities worth A$138.565 million. These were the major cash outflow from the investing activities. The net cash outflow from the investing activities was A$268.956 million. The company also paid dividend of A$14.830 million to its shareholders. The cash and cash equivalent at the end of the period was -A$4.837 million.
The current market price of the share is A$1.075 with a market capitalization of A$795.39 million and PE ratio 11.86x.
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