The spot gold price may have fallen 22 per cent in the last 12 months but that has not put off Resolute Mining. The gold miner is not afraid to expand.
The Perth-based company, which has two African gold mines and one Australian mine, says it is committed to its $266 million expansion of its Mali mine Syama and may reopen its Sarsfield mine, which sits alongside its Ravenswood mine in Queensland. Resolute Mining says Sarsfield has reserves of 1.1 million ounces.
The Ravenswood mine's life could be extended another nine years by reopening the Sarsfield pit, Resolute said in an ASX statement. But that means an additional $123 million in capital costs. Average cash costs at the mine are $1106 an ounce.
The spot price of gold fell to $US1237.65 an ounce at 1028 AEST, down 31 per cent from a 52-week high of $1790.40 on October 4.
Last week Mungana Goldmines Managing Director Pat Scott told Markets Spectator the precipitous drop in the price of bullion would force 20 per cent of current Australian gold production to shut down. Resolute Mining says its gold production is not hedged, meaning its costs and sales are totally based on the gold price.
In its 2014 financial year Resolute Mining says its production costs will be $830 an ounce on estimated production of 430,000 ounces. The company plans to spend $61 million on its Syama mine in its 2014 financial year and $113 million in 2015.
Resolute Mining bought a 19.67 per cent stake in Noble Mining, owner of the Bibiani gold mine in Ghana, for $80 million in November last year when the price of gold was above $US1700. The company admits Bibiani has “underperformed”. It has not met production or cost forecasts.
At 1028 AEST Resolute Mining shares were up 2.5 cents, or 4.2 per cent, to 62.5 cents. The company’s market value has more than halved in the last 12 months.
The S&P/ASX200 Index was down 26.991, or 0.6 per cent, to 4,775.60. The index has gained 16 per cent in the last year.