Ann: FY17 Unaudited Financial Results, page-39

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cashman2284

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08/08/17

12:55

Post #: 26361408
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Originally posted by loki01 ↑

I think three things are holding RSG back;

1. Concern that the gold price will do little or even head downwards over the next 6-12 months;

2. The headline costs and production levels for FY2018, while appearing to be conservative when based on the previous two years, they could be about right given RSG is transitioning both its mining operations this year. I think that the 2018 300k ounces production and related costs forecasts include whatever they expect to get from gold in circuit extraction. They excluded the GIC last FY from the forecasts, thereby making it easy to outperform.

3. The high cost at the Syama sulpides operations reported in the last quarter, while understandable, could continue until Project 85 has been completed in the March 2018 quarter and until the average milling grade can be increased (which is expected to happen) from outside of the low grade ore stockpiles.

4. As part of the transition at Ravenswood, 2018FY production falls to only 80k ounces (back to 100k+ ounces from FY2019). Hence costs are higher.

5. The market wants proof that they can deliver on production and costings with the new mine configurations.

6. RSG will not have a big surplus of funds this year and will be running down its large cash balance.

7. Due to massive country risks the Egypt project is a negative for the company, even if they have not spent a cent to date.

8. Recent labour unrest at Syama, in a high risk jurisdiction, does not help.

I expect there will be some sort of substantial lift in the share price only if the USD POG heads over 1300 or they report sustainable improved operational outcomes at Syama next quarter.

In short, it could a long wait before we see RSG back near $1.50. If all goes according to plan then by late next year we should be there or even higher, perhaps back to $1.80 so long as the gold price does not tank.

Frustrating as it is, there is no point in fretting about RSG's performance so long as they deliver to plan and the gold price does not tank under USD1200. In this market the goldies have to prove themselves and there is no quarter given if they fail to deliver.

loki (Oh my God, but I was promised by Gerald Celente we were heading back above USD1400/ounce by the end of 2017 - just think of the govnut borrowings out there underpinning the need for a much higher gold price - and buying goldies was an ironclad way of making millions at next to no risk. )

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Great post Loki,

Completely agree. I believe with the gold price a few have been burnt with the increase / decrease of the gold price and therefore the goldies moving with it. IMO they are waiting for it to break out of a range either way before you see a decent move in the SP of goldies. The GDX rebalance also contributed to the sentiment of goldies in Aus especially companies like RSG that had their weightings reduced.

RSG Price at posting: $1.05 Sentiment: Buy Disclosure: Held
1 Upvote

0 Great analysis

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