Performance Last 12 months

Since late May 2022, the AUD gold price has risen by about 15%. Due to perhaps rising mining costs in Australia impacting on profitability, the ASX Gold Index by comparison has only risen by about 6% over the same period.

The RED share price, which had already been coming off a high prior to May 2022, has since fallen by about 65% over the last 12 months.

In terms of overall market capitalisation, RED's market cap. at the moment is around 48% lower than it was in May 2022 despite the two capital raisings completed over the last 12 months.

Although it's not a standard valuation measure, I've calculated that the market cap. of RED in late May 2022 equalled about 385,000 times the current AUD gold price at the time. At the moment, the market cap. of RED equals about 175,000 times the current AUD gold price. This could be explained, in part, because RED's AISC costs per ounze were forecast to be lower in May 2022 than they are the most recent forecasts provided by management.

Although it's only a comparison with one company, and a pretty good company at that, the RED "numbers" look pretty average when compared to NST whose market cap. and share price are about 35% higher now than they were in late May 2022.

The above numbers are quite confronting - particularly against a backdrop of the increase in the AUD and USD gold price over the past 12 months - and they certainly explain the disquiet/disappointment expressed on this forum by a number of shareholders and posters.

For a "turnaround" in RED's performance to begin to occur, my view is that we'll need to see a good performance from KOTH in the 3 months to 30/6/23 (this period should give a good guide to what the mine can actually achieve running at or above nameplate capacity).

Production numbers for March and April looked promising but we're yet to see what mining costs were for these months and therefore what profitability was actually achieved. If the business generates good profits over the April-June Quarter this year, this might remove some of the uncertainties which seem to be currently impacting on the RED share price.

In this (possibly optimistic) scenario, the current RED share price would look very, very cheap and may encourage potential buyers to get out their slide-rules and consider the merits of a takeover bid for RED.

Even though RED might look like a very cheap buy for a US or Canadian miner, I'm not sure whether they'd be keen to pick up such a small producer, so my feeling is that if a takeover offer for RED is ever made, it's more likely it'll come from a local entity.

In this regard, I derive comfort that RED's largest shareholder has been a net buyer of the stock over the past 12 months, and that if another local gold miner wants to successfully mount a full takeover of RED, that they'll have to pay a price acceptable to the largest shareholder.