Ramelius Resources is positioned to play a possible starring role in the June 30 results derby, helped by the exploding US and Aussie dollar gold prices and a firm handle on costs.
Ramelius’s decision to end its ambitious eyeing of Karora Resources (the takeover cost would have been more than $1 billion and the surging gold price in fact made it all but impossible to settle on a bid price) has cleared the way for investors to concentrate of what looks like being very good news from the company when the March quarter report is out later this month and then the full year reports in July and August/
In an effort to boost its credentials and generate more cash, Ramelius looked to boost its gold production in the March quarter as it encountered higher quality ore. That has paid off in spades.
And with Australian gold prices above $A3,000 for most of the quarter (and US dollar prices around $US2,000 an ounce as well), Ramelius pulled off a big boost to gold output to more than 86,000 ounces for the three months to March 31.
Quarterly gold production of 86,928 ounces (oz) was significant higher than guidance of 70,000 to 77,000 ounces and topped the previous record of 86,516 ounces.
That’s a big hint that the company is on the way to a big upgrade in its 2023-24 production guidance of 265,000 to 280,000 ounces (from 250,000 to 275,000 ounces).
With the big boost in the third quarter taking 9 month output to more than 210,000, Ramelius can get close to 290,000 ounces by June 30 if it repeats the march quarter performance.
Ramelius hinted in Wednesday’s update that shareholders can expect more news in this area in the March quarterly report later this month when it ended the release with this comment on how the quarterly would include " a review of how this outperformance will positively impact full year FY24 gold production and AISC Guidance.”
With gold prices looking to rise from their post March 31 highs around $US2,300 an ounce and the $A price close to $A3,500 another solid production performance could see a very large profit earned in the June 30 quarter.
Because of the sharp jump in gold output, the company says its All in Sustaining Cost per ounce (AISC) will be “materially lower” (in the range of $A1,375 – $A1,475/oz). Given the widespread inflation across the sector, this is a big development.
That means the second half will see a dramatic fall in the AISC because the first half saw 124,047 ounces produced at an AISC of $A1,899 an ounce.
In 2022-23, 240,996 ounces were produced (just at the bottom of the forecast range of 240,000 to 250,000 ounces) at an AISC of $US1,895.
So Ramelius looks like it is heading for a boomer of a second half with costs down more than $A400 an ounce and the average gold price up 10% so far in 2024, and possibly 40,000 to 50,000 more ounces of gold produced by June 30.
This means a big profit but also the possibility of the company boosting its one dividend a year (paid after the final report and 2 cents a share last year).
It will have considerable scope to do so with cash and gold on hand at March 31 of $A407 million, up $A125 million from the end of December’s $A282 million, while free cash flow for the quarter was a record $A125.3 million (almost double the $A69.4 million in the June, 2020 quarter.
Ramelius had revenue in 2022-23 of $A631 million and EBITDA of more than $256 million, while for the December, 2023 half it reported revenue of nearly $349 million and EBITDA of $140 million.
Just based on the expected drop in costs, the higher production and gold price, the company is looking at a very significant rise in revenue and earnings for the final six months of 2023-24 – with the only proviso being a new weather event like the three already that have drenched parts of the WA gold fields in the first quarter of(but missed Ramelius).
