27/08/2009 - 14:47

Resolute plans ramp-up on profit return

27/08/2009 - 14:47

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Gold miner Resolute Mining Group has turned last year's $56 million loss into an after tax profit of $27.4 million in FY2009, including an unrealised treasury gain of $1.1 million, on the back of increased revenues, production and gold cash costs.

Gold miner Resolute Mining Group has turned last year's $56 million loss into an after tax profit of $27.4 million in FY2009, including an unrealised treasury gain of $1.1 million, on the back of increased revenues, production and gold cash costs.

Revenues from continuing operations increased by 28 per cent on last year's $235.4 million to reach $301.3 million as the group's total gold production exceeded 300,000 ounces at an average cash cost of $714 an ounce.

The company has forecast gold production for the year ahead of 400,000 ounces at cash costs of around $790 per ounce, if the ramp-up of the Syama gold project in Mali remains on target.

 

 

 

Full announcement below:

 

HIGHLIGHTS
- Strong underlying profit after tax of $27.4m
- Total gold production of over 300,000 ounces
- Syama construction complete with operation ramp up underway
- Cash and bullion of $13.0m at 30 June 2009
- Forecast group production of 400,000 ounces for 2009/10

RESULTS

- Revenues from continuing operations increased by 28% to $301.3m (2008: $235.4m).
- Profit before unrealised treasury and tax was $28.1m (2008: $8.6m loss). This result includes $11.5m (2008: $12.1m) of exploration costs charged directly to the income statement as a result of changes in the accounting policy for exploration expenditure, $16.5m (2008: $5.6m) of non-cash impairment charges and a $10.0m profit on the sale of the Challenger royalty stream.

Profit after tax of $27.4m (2008: $56.7m loss) includes unrealised treasury gains of $1.1m (2008: $38.4m losses).

OPERATIONS

- The Group gold production for the year was 303,722 ounces (2008: 293,057oz) of gold at an average cash cost of A$714/oz (2008: A$617/oz).

- Golden Pride gold mine in Tanzania, Africa, produced 127,047oz (2008: 150,224oz) at a cash cost of A$656/oz (or US$486/oz) (2008: A$497/oz or US$449/oz).

- Ravenswood gold mine in Queensland, Australia, produced 151,913oz (2008: 142,833oz) at a cash cost of A$763/oz (2008: A$743/oz).

- Syama gold mine, although still in ramp-up phase at 30 June 2009, produced 24,762oz. Production costs and gold sale proceeds have been capitalised.

DEVELOPMENT

Syama:

- Work on the re-development of the Syama gold mine in Mali was completed during the year and the project is at the plant ramp-up and optimisation phase, with all process areas operating. The majority of construction punchlist
items have been completed with only minor items remaining outstanding.

- Forecast total capital cost of the redevelopment has been revised down to US$186M. At 30 June 2009, US$3.0m of this is due for payment and US$7.5m is still to be resolved.

- Syama pre-production operating costs and inventory build-up, net of pre-production gold sales were A$77.6m.

- Feasibility study of Syama upgrade for free milling ore well advanced and supported by 190,000oz reserve defined at A21, Mali, and 605,000oz resource established at Finkolo, Mali.

EXPLORATION

- Exploration continued at regional and near mine prospects in Mali, Tanzania and Queensland.

- Exceptional economic intercepts including 18m @ 35.0g/t Au, 10m @ 12.7g/t Au, 5m @ 24.7g/t Au, 8m @ 10.3g/t Au, and 16m @ 5.1g/t Au have been received from a continuous zone of gold mineralisation with a strike length of more than 2km at the Tellem prospect (10km SW of Syama - Mali). Additional drilling at depth and along strike to the north and south is planned prior to conducting resource estimations.

- Drilling at Kavsav (8km NE of Golden Pride - Tanzania) returned some excellent intercepts including 10m @ 3.8g/t Au, 32m @ 1.4g/t Au, 8m @ 4.9g/t Au, 19m @ 2.7g/t Au, 44m @ 1.4g/t Au, 16m @ 1.9g/t Au, and 12m @ 2.5g/t
Au from a mineralised zone with a strike length of more than 1.6km. Further drilling is planned prior to an initial resource estimate.

- Exploration expenditure and activity was reduced during the year with only committed and key programs completed.

CASH & BORROWINGS

- Group cash and bullion at 30 June 2009 was $13.0m (2009: $30.0m).

- Net operating cash inflows during the year were $65.7m (2008: $22.1m).

- Net investing cash outflows of $171.2m (2008: $173.1m) include expenditure on exploration and development areas of $161.2m (2008: $181.5m) and full year proceeds of $13.2m from the Challenger gold royalty.

- Fund raising activities during the year, by way of issuing shares and convertible notes, provided gross proceeds of $89.0m. Costs associated with the fund raisings were $5.1m.

- At 30 June 2009, Resolute's total borrowings were A$137.3m (2008: A$69.4m) and comprised US$44.0m (or A$54.0m) owing on the Barclays senior debt facility, US$8.1m (or A$9.9m) of loans from Barclays used to purchase gold put options, A$10m owing to the provider of a credit facility drawn down during the financial year, A$51.7m owing to holders of Resolute Convertible Notes, hire purchase / finance leases totalling A$6.1m, and a A$5.6m bank overdraft facility. The borrowings amounts stated here differ to those shown on the balance sheet as these amounts exclude sunk-cost establishment fees and apportionments between debt and equity as required by accounting standards.

- At 30 June 2009, the weighted average interest rate payable on the borrowings at that date was 7.2%.

- Repayments of borrowings during the period totalled $27.6m (2008: $4.7m).

- Interest of A$3.1m owing on the Resolute Convertible Notes for the 6 months ended 30 June 2009 was paid on 30 June by way of an issue of Resolute ordinary shares.

- The quantity of hedging commitments decreased during the year by 65,488 ounces of gold, and as at 30 June 2009, approximately 12% of Resolute's attributable gold reserve is committed to hedging contracts.

- The average cash price received per ounce of gold sold during the year was A$1,051/oz (2008: A$775/oz).

- The speed of the ramp up of the Syama Project to feasibility study levels will directly impact whether further funding or financial accommodation is required to ensure the group's planned expenditure programs can be committed to in an orderly fashion. Short term forecasts indicate cash will need to be managed carefully, whilst long term cash flow forecasts continue to look robust.

OUTLOOK

Forecast gold production for the Group for the year ending 30 June 2010 is 400,000 ounces at a cash cost of approximately A$790 per ounce. This forecast is sensitive to the timing of the ramp up of the Syama project and the USD/AUD exchange rate.

Golden Pride:

Mining for the coming year will focus mainly on the main ore zone in the central pit. The processing plant throughput will decrease over the next year as the harder fresh ore being fed into the circuit increases. This reduction in throughput will be offset by the expected improved head grade of the ore to be processed. Overall gold production is expected to be unchanged. Costs per ounce are expected to increase due to the cost of mining and treating the harder sulphide ore from deeper in the pit.

Ravenswood:

Sarsfield low grade ore stockpiles will continue to be treated with Mt Wright ore for all of the 2009/10 year. The head grade of the ore to be processed in the coming year is expected to be significantly less than that achieved in 2008/09 due to an increase in the portion of the mill feed to be sourced from the remaining low grade stockpiles. Mt Wright's contribution to the project will continue to gradually increase as capital expenditure on the development
of the decline and orebody continues.

Ravenswood's gold production is expected to be lower over the next year as a result of the projected lower head grade, with costs per ounce steady as a result of the nil accounting value placed on the low grade stockpiles, offset by the lower head grade.

Syama:

Plant performance and gold production is expected to continue to improve from levels seen in July. The timing of the ramp up and optimisation phase will have a direct impact on projected gold production and cash costs per ounce for the coming year. Specific guidance on Syama's gold production and cash costs for the coming year will be provided
when further operational experience is gained.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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