AUS
NZ
UK
CA
USA
IND
Summary
- In the backdrop of COVID-19 pandemic, from the safe-haven commodity, gold is now emerging as a crucial strategic asset.
- With gold prices reaching a record high in the recent past, there has been a lot of interest from the investing community around gold mining companies.
- Multinational gold producer, OceanaGold Corporation has strengthened its balance sheet and revised the near-term mine plan for Haile. Full-year consolidated gold production expected at 295,000-345,000oz.
- Resolute Mining reported robust half-year report with underlying EBITDA up by 95 per cent and gold production grew by 24 per cent. It has maintained 2020 guidance of 430,000oz at an AISC of US$980/oz.
The pandemic period has changed many things, like the perception about gold investment. Considered as the safe-haven commodity, gold is now emerging as a crucial strategic asset. Institutional investors are embracing gold as an option to traditional stocks and bonds for the diversification and higher risk-adjusted returns.
There has been a lot of interest around gold mining companies from the investing community, given the rallying gold prices.
Also read: ASX 200 Gold Stocks on Bourses Supporting Gold Rally
In that backdrop, let us discuss two ASX-listed gold producers, covering their latest market updates and stock performance.
OceanaGold Updated Near-Term Mine Plan for Haile, Strengthened Balance Sheet
On 28 August 2020, multinational gold producer, OceanaGold Corporation (ASX:OGC) released a corporate update concerning ongoing efforts towards managing near-term risks due to the global pandemic, in addition to associated impacts on production guidance.
OGC highlighted to have implemented the COVID-19 related safety measures of physical distancing, staggered shifts, continuous disinfecting of everyday use areas and mandatory self-isolation of suspected or confirmed cases, in addition to an uncompromising health screening process upon entry to the mine site.
Until June, OceanaGold had no positive cases of COVID-19. However, since June, Haile had 18 positive cases, and nearly 220 workers have been required to quarantine for two weeks at some point since the beginning of March. These necessary protocols hugely impacted staffing levels at the Haile gold mine in the US. Moreover, the outlook at Haile for the remaining period of 2020 remains uncertain, owing to factors like productivity losses due to weather and continued fluid situation in the US concerning coronavirus.
Consequently, the company revisited its near-term mine plan for Haile, expecting 2020 production between 135,000 and 175,000 ounces of gold. OGC expects consolidated gold production of 295,000-345,000 ounces for 2020.
Strengthened Balance Sheet: OGC entered a new forward gold sale arrangement with Citibank, BNP Paribas and the Commonwealth Bank of Australia (ASX:CBA). The company was due to receive a pre-payment of ~USD 77 million on 28 August 2020 as per the agreement, in exchange for delivering 40,000 ounces of gold in Q2 of 2021. The volume is likely to represent about 10 per cent of the next year's anticipated gold output, excluding any contribution from Didipio.
Other opportunities expected to create significant value for shareholders include:
- OGC continues to advance the Waihi District opportunities, which are planned to deliver the most massive organic growth in its three-decade history.
- Golden Point underground study is expected to be completed in this quarter and reflect a meaningful mine life extension at Macraes.
- OGC is expecting to begin development of the Horseshoe underground in 2021, giving access to a high-grade underground feed source at Haile.
Also read: Oceanagold Granted Mining Permit for Gold Project In New Zealand
On 1 September 2020 (AEST 02:27 PM), OGC was trading downward by 1.553 per cent to AUD 3.170. The stock has delivered a return of more than 41 per cent in the last six-month period.
Resolute Mining Reported Robust 1H20, Gold Production at 217,946 ounces
On 28 August 2020, Resolute Mining Limited (ASX: RSG) released an excellent half-yearly report for the six months to 30 June 2020.
Here are the key highlights:
- Gold production stood at 217,946oz in 1H20, compared with 176,237oz in the same period a year ago.
- Gold sales noted at 212,668oz at an average gold price received of USD 1,427/oz, up from 176,294oz at USD 1,275/oz in 1H19.
- Revenue from gold and silver sales stood at USD 305 million, up from USD 229 million in 1H19.
- Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of USD 107 million (1H19: USD 55 million).
- Net profit after tax of USD 36.3 million (1H19: USD 27.5 million).
- All-In Sustaining Cost (AISC) of USD 1,020/oz, compared with USD 828/oz in the year-ago period.
- Cash and bullion balance stood at USD 88 million, listed investments of USD 35 million and promissory note of AUD 50 million.
- Ravenswood sale completed with total proceeds of up to AUD 300 million.
Syama underground operations returned to full capacity with sulphide processing improvements growing to 80 per cent in the June quarter. Mako Life of Mine Plan (LOM) updated, increasing gold production by 39 per cent and adding two years of mine life.
Equity Raising: Refinancing completed through AUD 195 million equity raising, including two-tranche placement and share purchase plan launched in January 2020, fully backed by new and existing investors.
Debt Refinancing: Existing USD 195 million syndicated loan facility replaced with new flexible, low-cost USD 300 million senior debt facility in March 2020. It included USD 150 million revolving credit facility with a three-year term and USD 150 million term loan facility with a four-year term. RSG has strong support from banking syndicate, including existing financiers.
Guidance: Resolute Mining has maintained 2020 guidance of 430,000oz at an AISC of US$980/oz. The guidance reflects asset-level performance for Mako at 160,000oz at an AISC of USD 800/oz, for Syama at 260,000oz at an AISC of USD 960/oz and actual production during the March 2020 quarter for Ravenswood.
The company has also maintained group level cost guidance of USD 980/oz. FY20 capital expenditure guidance has been allocated between non-sustaining of USD 15 million, exploration and other development of USD 25 million and sustaining of USD 30 million.
On 1 September 2020 (AEST 02:29 PM), RSG was trading at AUD 1.132, up by 2.443 per cent. The company has a market capitalisation of AUD 1.22 billion and its stock has delivered a return of more than 17 per cent in the last six-month period.
