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Why the Resolute Mining (ASX:RSG) share price is crashing 13% lower

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The market may be charging higher on Thursday but the same cannot be said for the Resolute Mining Limited (ASX: RSG) share price.

In morning trade the gold miner’s shares crashed 13% lower to 92 cents.

This latest decline means the Resolute share price is now down 45% from its 52-week high.

Why is the Resolute share price crashing lower?

Investors have been selling the company’s shares in recent weeks due to developments in Mali where its key Syama operation is based.

Last month Resolute’s shares came under pressure following the resignation of Mali’s President after he was detained by mutinying soldiers. Given that the company’s Syama gold operation contributed 59.4% of its total production during the June quarter, any disruption could have a major impact on its results.

This morning the company revealed that its Syama operation is about to be disrupted, but not because of the change of government.

According to the release, it has received a strike notice from the local workers union informing of plans to observe a 10-day strike order if certain demands are not met. The principal demand of the union relates to a request to reinstate Syama workers who have been stood down on full pay due to the company’s COVID-19 protocols.

Resolute has implemented a comprehensive, company-wide response to the coronavirus pandemic. At Syama, a decision was made to limit the travel of non-essential workers from outside the surrounding region to the mine site. This decision was made to limit the risk of transmission of the virus between separate regional populations and to maintain Syama’s isolation from the virus.

Resolute advised that it has informed the union that the strike notice is irresponsible, opportunistic, and represents a breach of the commitments made in the Syama Workforce Stability Agreement. It is currently considering how to respond to the strike notice.

In light of the uncertainty this is causing, Resolute has withdrawn its production and cost guidance for FY 2020.

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Motley Fool contributor James Mickleboro 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.

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