While Goldman predictions on RSG have been terribly wrong so...

While Goldman predictions on RSG have been terribly wrong so far, hopefully a stable gold price with potential for a rise past 2000 by March 2022 should ease the pain for us long suffering holders.

Goldman, 11 October 2021.

RSG (Buy, A$0.65/sh, +51% upside)

We have updated our CY21E/CY22E/CY23E earnings(-208%/-59%/-60%) with the 1H 2021 financial results, closure of the Bibianisale, adjustments to production forecasts at Syama Sulphide (downgrade in Julyand deferred maintenance into 2022), and the Sept Q MtM.

After repeated and ongoing guidance adjustments atkey asset Syama, we have revisited some of the underlying drivers andassumptions in our modelling to take a more conservative approach, assumingthat RSG continues to under-deliver relative to the metrics in their recentlyupdated life-of-mine plan. This has increased our forecast Sulphide operatingcosts from ~US$130-140mn/yr to ~US$170-180mn, consistent with recentperformance, on the expectation of occasional operational issues at Syamarelated to maintenance, processing plant performance, labour, and otherdisruptions. As a result of the significant operating leverage at the asset,our Syama valuation is down -A40c/sh, plus some valuation impacts at the grouplevel (net cash, exploration value). As a result, our group NAV is down by -45%to A$0.68/sh and our 12m TP is down -35% to A$0.65/sh. Our target pricemethodology (50:50 NAV:EV/EBITDA) is unchanged.

We maintain our Buy rating, based on:

1. Further production and cost improvements to come at Syama as production ramps up to nameplate, with Tabakoroni UG driving potential upside over time.
2. Best FCF in our coverage on a 12m view (17%/43% 2021E/2022E FCF yield).
3. Significant valuation discount, at 0.64xNAV on our base case vs. sector at 0.75x, and just 2.7x NTM EBITDA (vs. sector at 4.5x) despite a >10yr average mine life from two key assets.