Why the Resolute Mining Limited share price sunk 5% lower today

Resolute Mining Limited (ASX: RSG) was among the worst performers on the ASX 200 on Tuesday, with shares down 5% to $1.26 after the release of the company’s quarterly update.

In the first three months of 2018, Resolute produced 67,000 ounces of gold, a 25% decline from the previous corresponding period that induced the company to lower its production guidance for FY2018 from 300,000 ounces to 280,000 ounces.

A new underground mine is under construction at the company’s main project of Syama in Mali, which currently operates at a reduced capacity processing stockpiled ores.

Resolute is also seeking to expand its Ravenswood mine in Queensland, and finalised a promising feasibility study for the undeveloped Bibiani project in Ghana. When all three projects will be at their maximum capacity, production may grow up to 500,000 ounces of gold per annum.

The other negative highlight of the quarter is the all-in sustaining cost (AISC) of production: $1,332 per ounce, a 22% increase from the previous corresponding period. In the March 2018 quarter, industry peers Saracen Mineral Holdings Limited (ASX: SAR) and Regis Resources Limited (ASX: RRL) reported an AISC of $1,181 and $906 respectively – with low-cost player Evolution Mining Ltd (ASX: EVN), producing at $768 per ounce.

Resolute received a relatively high average price of $1,714 for an ounce of its product, but this wasn’t sufficient to generate a positive cash flow. Over the six months to March 31, the company’s cash balance shrunk by 38% to $139 million.

Foolish takeaway

I find this result negative, but not alarming. While the annual output target of 500,000 ounces is still far ahead, Resolute should be able to resolve the current production shortfall and improve cost metrics by this time next year with the upgrade of its Syama project.

In the meantime, investors interested in gaining exposure to gold miners can look at companies with higher operating margins, such as Evolution Mining and Regis Resources.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.