John Welborn is a former Wallaby rugby player and played for the Sharks in South Africa, so sporting allusions tend to run deep.
For him, the company has to stick to basics in order to convince investors to pick the firm’s share with the kind of enthusiasm that has seen compatriot company, Perseus Mining, double in a year. By comparison, shares in Resolute have tended to be flattish until very recently. The stock is up 18.9% since Friday.
“As you know, I have the history of rugby. Often, when I go to help at school rugby it tends to be that they’re doing all these incredibly complicated training moves, or their game plans are incredibly structural. In fact, the biggest thing you can do is focus on the catching and passing. If they do that, they start winning.”
In the life of Resolute, this translates into producing a few solid quarters of uninterrupted production. That’s not what the company got in September last year when processing equipment at its Syama mine in Mali suffered a technical failure.
Welborn thinks Resolute is recovering from that. “We haven’t yet demonstrated that consistency that some of our peers have. I’m very confident that we’re going to do that this year,” he said.
The other factor is that Welborn and Co. may have misread the gold market. For reasons to do with protecting the balance sheet (since much improved), Resolute took out gold hedges equal to about half of its 400,000 ounces in gold production planned for this year. The hedge will be closed in 2021, which might bring about the valuation lift.
Welborn has grown the firm aggressively – the banner deal was the $274m takeover of Toro Gold and its Mako gold mine in Senegal just under a year ago – while hiving off its Ravenswood mine in Australia. It also plans to sell Bibiani, a Ghana mine Welborn rates, but which doesn’t have the scale.
The question though is that with all this good work under his belt, the reticent share price might mean the company is vulnerable to the kind of consolidation Welborn has been espousing for Resolute?
“We would probably be on the radar of people who matter,” he said. The hope though is that it’s Welborn who gets to demonstrate the value of Syama (and Mako) before anyone else sees the opportunity.
This article was first published in the Mining Yearbook 2020 which is available here: https://www.miningmx.com/the-mining-yearbook-2020/
