Resolute lifts gold output for fourth successive quarter but inflation, hedge book hit home

Solid and dependable

RESOLUTE Mining increased gold output for the fourth successive quarter in the three months ended June producing 89,134 ounces – a 9% quarter-on-quarter lift – and keeping the London- and Sydney-listed firm on course for full year production of 345,000 oz.

The company operates at Syama mine in Mali and the Mako in Senegal. Whilst the latter has been a solid performer for Resolute since its purchase from Toro Gold, Syama has been problematic.

However, a shutdown for maintenance in the March quarter resulted in a 40% improvement in gold production from Syama’s sulphide operations. There was also record throughput at Syama’s roaster – 17% higher quarter-on-quarter.

Terry Holohan, CEO and MD of Resolute since April following the resignation of Stuart Gale, CEO of the firm for less than two years, said the highlight of the June quarter performance was the “operational improvements being implemented at Syama”.

He added, however, cost inflation – which has been a pressure on all mining companies this year – was a challenge. All-in sustaining costs (AISC) came out at $1,540 per oz – an 11% increase over the previous quarter. This was owing to higher fuel and consumables costs, a planned increase in waste stripping, and higher sustaining capital expenditure on the firm’s tailings facilities. The AISC number also includes “adverse” non-cash adjustments.

Resolute kept AISC guidance at $1,425/oz but it acknowledged that “unit costs may be adversely affected in input costs continue to rise”.

Mako produced a solid 33,649 oz, roughly the same as the March quarter, at an AISC of $1,205/oz. However the Syama oxide section was lossmaking. AISC totalled $2,336. Resolute said higher grades in the second half of its financial year would result in some improvement in cost control.

“Despite inflationary pressures being felt, we remain focused on maintaining and improving the group’s production profile for the remainder of 2022,” said Holohan. “This, coupled with ongoing cost control efforts, should offset some of these pressures.”

Hedging contracts equal to 30% of total production entered into as part of a financing arrangement continue to hurt Resolute. The company averaged a price on gold sales of 1,802/oz for the quarter against an average market price of $1,871/oz.

Resolute has 230,000 oz of gold hedged between now and December 2023 at prices between $1,803 to $1,875/oz.

A feature of Resolute over the last few years has been a burdened balance sheet. Net debt increased $8.1m to $182.8m as of June 30.