Despite a less than exciting lift in production guidance for 2024-25, Ramelius Resources (ASX:RMS) shares rose 3% at one stage yesterday as world gold prices surged during Asian trading, once again reclaiming the US$2,400 level.
Ramelius’ quarterly report and new guidance overshadowed news that the company had rejected the $300 million Stage 3 development at its aging Edna May mining complex in WA.
The flat guidance also included a significant increase in predicted costs for the year, suggesting the company will be mining a lot of average-grade ore and stockpiles at Edna May—unlike the closing months of 2023-24 when it processed much higher grades, leading to a surge in production and a decline in costs.
Group guidance has been set in the broad range of 270,000 to 300,000 ounces at a cost of A$1,500 to A$1,700 on an All-In Sustaining Cost basis (the industry’s standard measure of mining costs).
The guidance is essentially unchanged from the 293,033 ounces produced in 2023-24—but that was at a lower cost of A$1,583 an ounce, including around 82,000 ounces produced in the June quarter at the very low cost of A$1,362 an ounce.
Based on the final quarter’s cost, Ramelius could be facing a 10% to 25% jump in costs per ounce this financial year, linked to the eventual outcome of the final months of output from Edna May, with mining costs spread across lower-grade stockpiles.
The company acknowledges the flat outlook, especially compared to the strong 2023-24, when it raised guidance to 285,000 to 295,000 to account for increased grades and improved mining conditions.
“Group gold production guidance is higher than the 3-Year Production Outlook released in November 2022,” Ramelius defensively stated in its quarterly report and guidance update on Monday.
Most of the gold will come from its Mt Magnet operations, with a forecast of 230,000 to 250,000 ounces at an AISC of A$1,300 to A$1,500 an ounce.
Ramelius says production from Mount Magnet will be weighted towards the second half of the year, which the company expects will see a decline in AISC costs as more ore is processed and gold production rises, with increasing tonnages from Cue becoming available and higher grades from the Penny mine.
The declining Edna May is forecast to produce 40,000 to 50,000 ounces at a high A$2,500 to A$2,700 an ounce (still well below the current A$ gold price), but Ramelius says the high price will allow it to process more lower-grade material from ore stockpiles at Edna May.
Despite a world gold price well above A$3,000 an ounce, Ramelius announced on Monday its decision to shelve the third stage at Edna May.
The company stated it had evaluated a potential Stage 3 cutback at Edna May and “the Board has determined that the project economics are not sufficient to warrant the investment of approximately A$300 million, primarily consisting of pre-production mining costs and ancillary equipment purchases including upgrades.”
“The required financial commitment combined with increased technical risk inherent in relocating ancillary processing infrastructure and the need for increased pumping capacity at depth has resulted in the decision to place the site on care and maintenance once processing of existing stockpiles is completed.”
“Care and maintenance costs, including the current Mine Rehabilitation Fund (MRF) liability of A$217,000 per year, are not expected to be material. Current employees will be deployed elsewhere within the business where possible with relatively few redundancies expected,” Ramelius said.
Ultimately, Ramelius believes the nearby Eridanus prospect, with its 21 million tonnes at 1.7 grams per tonne (for 1.2 million ounces of gold), will be a more promising project than expanding the aging and deep Edna May operation.
CEO, Mark Zeptner, said in Monday’s announcement that “The 2024 financial year was a record year for Ramelius in relation to gold production, cash generation, and earnings, and it is pleasing to be able to follow this up with such strong guidance for the 2025 financial year. Our disciplined and focused acquisitions over the last few years now support the Mt Magnet operations with production there expected to increase 50% to around 240,000 ounces.”
“As we look forward, the development of the Cue open pit mine will provide higher-grade ore, and we will also see increased production from Penny as grades and tonnages there increase.”
“The Edna May operations will generate meaningful cash flow in FY25, albeit that unfortunately Stage 3 project did not meet our capital allocation hurdles.”
“Our technical and exploration teams are very optimistic about the significant value that a larger Eridanus resource, be it ultimately developed as an open pit or underground operation, can bring.”
