high cost producer= highly leveraged to gold $, page-9

With compliments from strauss:

Ramelius - WA focused Gold Producer

Market Cap $45m Cash Liquid Assets Plant Equipment worth about $75m
Gold funding facility of $16m and payables of about $20m

Roughly leaves an EV of $10m

Stock suffered a lot of misfortune with production problems resulting in higher production costs as well as a falling gold price. But with the rising gold price finally breaking up it is the high cost producers such as RMS who were marginal or loss making under the previous lower prices that stand to benefit the most.


Last qtr RMS produced 22k Ozs at a cost of $1,450/Oz
But the gold price received was $1,375/Oz so RMS lost $75 for each Oz it produced.


But with a rising gold price currently around $1,525/Oz RMS would have made $75/Oz profit.

So a $6m loss vs a $6m profit for that Qtr is the difference the rising gold price has made or $12m difference in total (22k Ozs at $150/Oz difference)

So while the current moves in gold might not seem like much to the high cost producers like RMS they have a huge impact.

This doesn't even take into account lower forecast production costs as RMS gets its production back on track.

"PRODUCTION GUIDANCE – MARCH 2014 QUARTER

Mt Magnet (inclusive of Western Queen South) is expected to produce 20,000 ounces of gold in the March 2014 quarter, at a total cash cost of A$1,300 per oz.

Coogee is expected to produce 7,000 ounces of gold in the March 2014 quarter, at a total cash cost of A$1,000 per oz."

Under such a scenario the company the company would generate a gross profit of $8M per qtr or $32m per annum giving it a PE around 1