African gold miner, Resolute Mining (ASX:RSG), used the opportunity presented by a bullish three-year update released on Friday evening to downplay a reduction in guidance for its 2023 financial year, ending December 31.
Due to issues detailed in the statement, the company has been implementing cost-cutting measures across its two mining operations to maintain a steady and controlled All-In Sustaining Cost (AISC) in light of the slip in projected production guidance.
Resolute stated that while the Mako and Syama sulphide mining operations in Senegal "continue to perform according to their respective schedules, the Syama oxide operations have not performed as planned due to mining lower-grade ores, thereby impacting production."
"This has led to an overall revision in gold production from our target of 350,000oz to a range of 330,000-340,000oz for the year.
"Group AISC guidance for 2023 remains unchanged at US$1,480/oz, thanks to the implementation of sustainable cost reduction initiatives introduced throughout 2023 across all aspects of the Group."
Capex for 2023 has been reduced by $US18 million to approximately $US70 million (excluding the Phase 1 Expansion capital).
Looking beyond this year, Resolute is optimistic about the next three years' operations at both mines. They forecast, "Over the next three years, we expect to see strong growth from the Syama sulphide operations, with the mine surpassing 260,000oz per year by 2026 as the underground Sub-Level Cave (“SLC”) performance continues to improve and the Phase I Expansion project ramps up.
"At Mako, following the successful cut-back completion in 2023, both 2024 and 2025 will witness increased profitability with production ranging from 130,000-140,000oz per year at an all-in sustaining cost (AISC) reduced to US$1,100-1,200/oz from approximately $1,450/oz."
This translates to a Total Group gold production of 1,000,000-1,100,000 oz for the three years from 2024 to 2026; Syama gold production exceeding 260,000 oz per year in 2026 as the Syama North enhancement becomes fully operational; Mako gold production of 130,000-140,000 oz in 2024 and 2025 as high-grade (>2 g/t) ore is processed; and
Group AISC is projected to decrease from $US1,480/oz this year to $US1,175-1,275/oz by 2026.
Resolute CEO, Terry Holohan, stated that, "Unfortunately, in Syama, due to precluding operations in the Tabakoroni open pit, we had to replace this ore with significantly lower grade material. As a result, we are revising down our guidance to 330,000-340,000 oz for 2023. However, over Q4 2023, the oxide operations are expected to return to planned grades."
Mr. Holohan added, "The release of our three-year forecast is to provide clarity and confidence to the market that Resolute remains on its stated organic growth path to increase ounces and improve margins across all its operations."
Resolute shares closed at 36 cents on Friday, and while news of a downgrade would typically lead to pressure on the stock from Monday onwards, the 3.1% surge in gold prices on Friday may offset any pressures, especially with the company emphasising its cost-cutting measures to protect margins.
