Resolute Mining is looking at a very sharp jump in revenues (and presumably earnings) in the 2012 financial year after updating the market yesterday on its production plans which contained forecasts of a 24% rise in output and a near 20% drop in costs.
No wonder the shares rose more than 8% at one stage yesterday to $1.14. They ended up 8c at $1.13, a rise of 7.6%.
The short statement to the ASX saw Resolute boost production guidance to 410,000 ounces from the 330,000 expected in the 2011 year.
And the company said production costs would fall from around $900 a tonne to $730, giving a rough (based on the gold price of around $US1500 an ounce) gross margin of $770 an ounce, up from less than $600 for the 2011 year.
That would give a gross profit of more than $300 million and left open the suggestion yesterday that it would consider some sort of capital management activity.
The company said the improvement in outlook is underpinned by progress being achieved at the Syama operation in Mali to an annual capacity of 250,000 ounces.
Increased plant throughput and higher head grades are expected over the period, resulting in the substantial lift in production and reduction in cash cost per ounce.
This confidence has been consolidated by plant performance since the completion of the scheduled Syama shutdown earlier in June 2011.
"This forecast cements Resolute’s position as the second largest primary listed gold producer on the Australian Securities Exchange," the company said.
Resolute Chief Executive Officer Peter Sullivan said: “Our strengthening outlook not only provides encouragement for our team making great strides in the turnaround of Syama, but it also provides the financial base to turn our attention towards the growth opportunities we see in Syama and Ravenswood in Australia.
"The robust cash flows we expect in the coming years will leave Resolute unhedged, ungeared and well positioned for growth as well as considering direct returns to our shareholders.
In the coming year Resolute said it’s looking "on making meaningful progress at several development projects to improve its long term production profile and cost structure".
"At Syama this involves an expected future increase in gold production through the addition of an oxide circuit to treat ore from near-surface deposits discovered along strike to the north and south of the main pit.
"In addition, a lift in gold reserves and extension of the overall mine life is anticipated following the results of the feasibility study underway investigating the planned deepening of the main Syama pit.
"Work will also continue on the grid power connection at Syama which will deliver significant cost savings and other operational benefits.
"At Ravenswood in Queensland the reopening of the Sarsfield open pit will deliver a long term ore source for the Ravenswood plant.
"The process to obtain all regulatory approvals for this has commenced. In addition further development drilling to extend the depth of the Mt Wright ore body is planned.
"In conjunction to its organic growth projects, Resolute will continue to focus on optimising its balance sheet through a significant reduction in its secured debt in the first half of the year.
"Should the existing listed share options and convertible note debt be converted to equity by the end of December, Resolute would move to a position of being effectively ungeared with zero net debt.
"The listed options have an exercise price of 60 cents and the convertible notes have a conversion price of 50 cents."
Resolute has three operating mines in Africa and Australia and is the second largest gold producer by volume listed on the ASX.
