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Ramelius (ASX:RMS) share price lower despite smashing Q1 guidance

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The Ramelius Resources Limited (ASX: RMS) share price is dropping lower on Tuesday despite delivering a strong first quarter production update.

At the time of writing, the gold miner’s shares are down 1.5% to $1.94.

What happened in the first quarter?

Ramelius performed ahead of expectations during the first quarter and delivered group gold production of 71,344 ounces. This compares to its guidance of 65,000 ounces to 70,000 ounces.

Also coming in ahead of guidance was its costs. Ramelius reported an all-in sustaining cost (AISC) of A$1,241 per ounce for the quarter. This compares to its guidance of A$1,250 per ounce to A$1,350 per ounce.

The key driver of this strong quarter was its Mt Magnet operation. It recorded production of 41,064 ounces at an AISC of A$1,138 per ounce. This was supported by its Edna May operation, which achieved production of 30,280 ounces at an AISC of A$1,387 per ounce.

Quarterly gold sales came in at 70,299 ounces, generating total revenue of A$163.3 million. This represents an average gold price of A$2,323 per ounce. As a comparison, the spot gold price is currently A$2,672.06 an ounce.

At the end of the period the company’s cash and gold balance stood at an all-time high of A$221.9 million, up from A$185.5 million three months earlier. This is after spending A$21.3 million on capital expenditure and exploration.

Net cash stood at A$205.7 million, with debt further reduced by A$8.1 million to just A$16.3 million.

Second quarter guidance.

More of the same is expected in the current quarter, with management guiding to group gold production of 67,000 ounces to 72,000 ounces. This comprises Mt Magnet production of 39,000 ounces and Edna May production of 30,500 ounces.

Costs are expected to be similar during the second quarter. Management expects to achieve its production with an AISC of A$1,200 per ounce to A$1,300 per ounce.

Capital expenditure will be higher. Management advised that capital and project development expenditure is projected to be approximately A$41.4 million.

This comprises A$15.4 million for the Eridanus cut back at Mt Magnet, $1.6 million for open pit development, A$17.6 million for Tampia (including modifications to Edna May plant), and $6.8 million for exploration.

Looking further ahead, management has retained its guidance for FY 2021. It continues to expect production of 260,000 ounces to 280,000 ounces at an AISC of A$1,230 per ounce to A$1,330 per ounce.

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Returns as of 6th October 2020

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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