Why the Resolute Mining (ASX:RSG) share price is charging higher today

The Resolute Mining Limited (ASX:RSG) share price is climbing higher on Wednesday for two reasons. Here’s why…

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In morning trade the Resolute Mining Limited (ASX: RSG) share price is charging higher.

At the time of writing, the gold miner’s shares are up 7.5% to 78 cents.

Why is the Resolute share price charging higher?

There have been a couple of catalysts for the solid rise in the Resolute share price on Wednesday.

The first is a rebound in the gold price overnight. According to CNBC, the price of the precious metal has risen 1.4% to US$1,857.50 an ounce. This was driven by optimism that major COVID stimulus is coming in the United States.

In addition to this, an announcement released yesterday evening by Resolute appears to have gone down well with investors.

What did Resolute announce?

Resolute has announced a binding agreement to sell its Bibiani Gold Mine in Ghana to China’s Chifeng Jilong Gold Mining Co.

According to the release, the two parties have agreed a total cash consideration of US$105 million. This comprises a US$5 million deposit on the signing of the agreement and US$100 million on completion.

The latter is expected by March 2021, subject to the satisfaction of government approvals and other conditions.

Resolute‚Äôs interim Chief Executive Officer, Stuart Gale, commented: ‚ÄúResolute is proud of its contribution to Ghana and pleased that our investments at Bibiani in exploration, feasibility studies, and community support will provide a strong base for future success and value creation. I am confident that Resolute‚Äôs positive legacy in Ghana, and the interests of all stakeholders in Bibiani, will be protected and enhanced under Chifeng‚Äôs ownership.‚ÄĚ

Chifeng’s Executive Chairman, Wang Jianhua, believes the operation fits well with its strategic focus.

He explained: ‚ÄúThe transaction is consistent with our strategic focus on our core operating assets together with balance sheet improvement. We are delighted to have secured such a significant gold mining asset in the current market. Resolute has defined an exciting future for Bibiani as a high margin, long life underground gold mining operation. Chifeng will immediately invest the required capital, and provide the necessary expertise, to recommission Bibiani as an operating gold mine in the shortest possible timeframe.‚ÄĚ

What’s next?

Resolute has agreed not to participate in any discussions for competing offers for Bibiani. It is also required to notify Chifeng if any superior proposal is received for Bibiani, following which Chifeng has 20 business days to match the offer.

If Chifeng does not match the offer, either Chifeng or Resolute may terminate the agreement, upon which a break fee of US$10 million will be payable by Resolute. The break fee is also payable by Resolute if Chifeng terminates the agreement due to a breach of its obligations under the agreement.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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