I think the announcement had nothing to do with the rise in the share yesterday. Just about all goldies rose and there were others that had large swings without any announcement.
We need clarification about what this announcement means in terms of production levels and costs for the Syama gold sulphide operation. That should come in the June quarter.
Obviously there will be costs in developing the underground mine. I am not sure if those costs are added to AISC or are capitalised over time. If just added then AISC will be recorded as being higher - but in any case the money has to be spent.
Gold production from the gold sulphide circuit (the main gold production at Syama) will fall because they will rely on lower grade ore stockpiles to a large extent. This will raise average milling costs but lower average mining costs (since mining at the main pit will cease soon after June 2015 and they will be using current stockpiled ore), so we do not know if the average cost of gold production will be up or down (if we disregard the cost of developing the underground mine).
The need to spend the funds on mine development (given all their other ongoing funded projects) will add an extra degree of risk to their operations and could dampen the share price. Obviously a higher gold price would be helpful, while a lower gold price detrimental.
Interested in hearing from people who know what is going on there.
Good luck punters.
loki
RSG Price at posting:
28.0¢ Sentiment: None Disclosure: Not Held
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