RED's headline announcement this morning seems to have...

RED's headline announcement this morning seems to have pleasantly surprised many. Perhaps "relieved" would be another word I could use.

However, I can fully understand the caution expressed by Undaunted and grindstone cowboy in their posts today. After all, the grade achieved in May is superior to recent results and the recovery rate was pretty impressive too. I reckon wondering how long such grades and such recoveries can be achieved are fair enough questions as posed by the above two posters.

However, reviewing RED's announcements about KOTH from way back in 2020, their long-range forecasts included things like a realised AUD price of $2,500 per ounze for gold sold and throughput from the (yet to be built) KOTH facility at 4mT p.a. At the moment, actual outcomes are at or above both these metrics (despite near term hedge deliveries being under the $2,500 per ounze figure).

Two other critical metrics forecast back in 2020 were estimated grades recovered (for the first three years from 1 July 2023) and recovery rates. The former was 1.6gT and that latter was 92%. As things transpired in May, grades recovered were a bit better and recovery rates were also a bit better than forecasts issued in 2020. The May result (even allowing for the days the plant wasn't operating) could possibly be a bit of an outlier and end up being better than future months will produce. Alternatively, the KOTH plant could now be running a bit better than the earlier forecasts suggested it would. If June's grades and recoveries can match those achieved in May, then with the extra days the KOTH mine will be operating that month, June production could also be a new record.

I won't comment on the level of AISC management was forecasting in 2020 other than to say it was WAY lower than what they're indicating it is at the moment.

Despite today's production announcement, I'd suggest a serious re-rating of RED will depend on how much it's actually costing to produce the gold. Hopefully, we'll get another pleasant surprise in July/August when management publishes June '23 Quarter results (including costs) and provides guidance for production and cost estimates for the 23/24 financial year.