Shares in Ramelius Resources Ltd (ASX: RMS) have been all but flat over the past year, despite large fluctuations over that period.
But the brokerage house Morgans is predicting decent share price upside for the mid-tier gold producer, with a bullish target, which I'll get to shortly.
First, let's see what they're saying about the company.
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New guidance imminent from this ASX gold company
Morgans said Ramelius is expected to release guidance for FY27 and an updated outlook out to FY30 later this month.
The broker said:
On production, we expect FY27 guidance to remain in line with the previous 200-220koz range, likely trending to the upper-end. Beyond FY27, we see scope for upside to the 2025 outlook through FY30. Increased mining rates at Break of Day following the Stage 2 cutback, along with mine life extensions at Penny, should drive higher head grades through FY27 and FY28. Gilbey's, not previously included in the outlook numbers, has the potential to be a key driver of production growth from FY29, displacing lower-grade mill feed.
Morgans said Ramelius had flagged that costs could head higher, "driven by ongoing inflationary pressures across labour, mining services and diesel''.
The broker added:
Management indicated cost inflation of up to 8% across key operating inputs, while a partially hedged diesel position provides some protection. In addition, an extra ~A$30m of sustaining capital at Galaxy aimed to lift mining rates from 600ktpa to 800ktpa is expected to increase costs in FY27.
Morgans said that, regarding dividend payments, it believed Ramelius was well-positioned to continue generating strong cash flows and returning capital to shareholders.
Ramelius Resources shares looking cheap
The broker maintained its buy rating on Ramelius shares, but reduced its price target from $5.80 to $4.74.
This compares to the current price of $3.75.
The broker added:
RMS remains our preferred mid-cap gold exposure, supported by a strong balance sheet, low cost operations and a clear pathway to production growth through the Mt Magnet hub and Rebecca Roe. The divestment of Edna May reinforces our view of management's disciplined capital allocation, crystallising value from a non-core asset while focusing attention to higher-return growth opportunities. We continue to view RMS as one of the highest-quality operators in the Australian gold sector.
Ramelius announced on Monday it had awarded the $313 million Mount Magnet Expansion contract to NRW Holdings Ltd (ASX: NWH).
The scope of work includes the construction of a new crushing circuit and coarse ore stockpile, installation of a new grinding circuit, additional leach tanks, and associated gold processing infrastructure, resulting in an additional 3 million tonnes per annum of processing capacity.
Ramelius is valued at $7.06 billion.
