Ramelius (ASX:RMS) share price crumbles on lower profit and gold production

Shares in the Western Australian gold producer are underground today.

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A woman holds a gold bar in one hand and puts her other hand to her forehead with an apprehensive and concerned expression on her face after watching the Ramelius share price fall today

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Key points

  • The Ramelius share price has dropped by as much as 8% today
  • The miner released its half-year results this morning
  • The company reported a drop in profits and gold production 

The Ramelius Resources Limited (ASX: RMS) share price is crumbling today following the release of the gold miner’s half-year earnings.

In the report, the Western Australian miner revealed a drop in profits across the board.

At the time of writing, the Ramelius share price is down 5.16% at $1.47.

Let’s take a look at what the company reported.

What did Ramelius tell ASX investors?

For the half-year ending 31 December 2021, Ramelius revealed the following results:

  • EBITDA down 3% to $187.7 million compared to the prior corresponding period (pcp)
  • NPAT down 10% to $73.4 million
  • Sales revenue down 9% to $310.1 million
  • Net cash and bullion down 29% to $164.5 million
  • Gold production down 8% to 132,605 ounces.

Ramelius attributed the drop in profit mainly to “lower head grades” at its Mt Magnet gold project in WA. However, it said this was still “in line” with internal expectations.

Further, the miner experienced higher costs and COVID-19 challenges during the half — a trending factor across the wider resources industry.

These issues drove up its all-in sustaining cost (AISC) to $1,473 per ounce — an increase of 17% against the pcp.

What else did the gold miner report?

A number of other factors ultimately impacted the miner’s cash balance during the half.

Ramelius said the drop in net cash and bullion was due to the finalised acquisition of Apollo Consolidated Limited.

Coming with the buy was the Rebecca Gold Project — a site containing “advanced and growing gold discoveries” that will drive future growth, Ramelius said.

Development operations at the miner’s Penny Gold Mine in WA began ramping up with “meaningful high grade ore production” expected in the next financial year.

The miner also offloaded assets during the half, including the sale of its Kathleen Valley Lithium Royalty for $30.3 million (before tax).

All in all, inventories for the period were up 46% to $147.1 million.

Managing director Mark Zeptner said:

The acquisition of Rebecca, our commitment to exploration and ongoing development opportunities at both production centres, combined with the strength of our balance sheet will allow us to continue both organic growth and the assessment of growth opportunities as they rise.

There was no interim dividend declared for the period, which was “in line with past practice”, the miner said. The board will assess dividends at the end of the financial year.

Since 31 December 2021, the Ramelius share price has dropped by 10%.

What did management say?

Despite the drop in profit and production, Ramelius management was “pleased” by the latest financial results.

Zeptner said:

The inability to deliver planned tonnages of high-grade ore from Tampia and Marda also impacted the bottom line. However, this is a timing issue only as the high-grade ROM stocks at both mines will get processed over the coming year. By way of future cashflows, this will begin to realise some of the A$147 invested in inventories on hand at the end of the period.

Despite the higher costs and slightly lower gold production, our underlying EBITDA margin remains very strong at just over 50%. This compares well with our peers and highlights that our business model remains robust.

Ramelius share price snapshot

Over the past 12 months, the Ramelius share price has increased by 7.3%.

The shares were trading as low as $1.18 at the beginning of 2021 and as high as $2 in May 2021. This was not long after the gold miner achieved its gold guidance for the 2021 March quarter.

The company has a market capitalisation of $1.275 billion and a price-to-earnings ratio (P/E) of 9.42.

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Motley Fool contributor Alice de Bruin 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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