Why the Resolute Mining (ASX:RSG) share price is crashing 8% today

This gold miner is having a bad day…

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The Resolute Mining Limited (ASX: RSG) share price has been a very poor performer on Thursday.

At the time of writing, the gold miner’s shares are down almost 8% to 52 cents.

Why is the Resolute Mining share price sinking today?

The weakness in the Resolute Mining share price today has been driven by the release of a disappointing quarterly update.

During the second quarter of FY 2021, Resolute Mining reported gold production of 77,450 ounces. This represents a 10% decline on production during the first quarter.

This was driven largely by its Syama Sulphide operation, which reported a 10% reduction in production to 33,463 ounces. It also recorded an all-in sustaining cost (ASIC) of $1,339 per ounce at the operation, up 5.1% quarter on quarter. This was the result of record levels of mining, processing, and roaster throughput, which were offset by power disruptions, an extension of scheduled mill maintenance, and lower grades.

The company’s Syama Oxide operation also reported a decline in production and an increase in costs. It saw production fall 13.4% to 13,424 ounces with a 12.6% higher ASIC of $1,466 per ounce. Management advised that record tonnes were processed but offset by lower blended grades and increase in circuit stocks.

Finally, its Mako operation reported a 7.2% decline in production and 5.6% increase in its ASIC to $1,094 per ounce. Management advised that this was in line with expectations during its cut-back phase.

Sales decline

Also declining during the quarter, and potentially weighing on the Resolute Mining share price today, were its sales.

According to the release, the company sold 68,103 ounces of gold during the quarter. This was down 18% on the previous quarter. One small positive was that its average realised price increased by 0.9% to $1,714 per ounce.

However, due to a 7% increase in its group AISC to $1,319 per ounce, its margin fell to $395 per ounce from $490 per ounce in the first quarter.

FY 2021 guidance downgraded

Unsurprisingly, given its poor performance during the second quarter, management does not expect to achieve its FY 2021 production guidance of 350,000 ounces to 375,000 ounces. Nor does it expect its ASIC to be within its guidance range of $1,200 to $1,275 per ounce.

Resolute Mining is now expecting production of 315,000 ounces to 340,000 ounces with an ASIC of $1,290 to $1,365 per ounce.

Following today’s decline, the Resolute Mining share price is now down 38% in 2021.

Should you invest $1,000 in Resolute Mining right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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