REG - Resolute Mining Ltd - Preliminary Final Report

Resolute MiningAnnouncement

24/02/2022 07:00

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RNS Number : 6864C  Resolute Mining Limited  24 February 2022

24 February 2022

 

Resolute Mining Limited

(Resolute or the Company)

 

Appendix 4E Preliminary Final Report

For the year ended 31 December 2021

`

Resolute Mining Limited (ASX/LSE: RSG) (Resolute or the Company) advises that
its Appendix 4E Preliminary Final Report has been released to the Australian
Securities Exchange.

Highlights

·       Total Recordable Injury Frequency Rate (TRIFR) of 1.25 (2020:
0.87)

·       Gold sales of 316,464 ounces (oz) at an average gold price
received of $1,733/oz (2020: 395,175oz at $1,562/oz)

·       Revenue of $549.2 million (2020: $603.0 million)

·       All-In Sustaining Cost (AISC) of $1,370/oz (2020: $1,074/oz),
reflecting lower gold production

·       Earnings before interest, tax, depreciation and amortisation
(EBITDA) of $129.9 million (2020: $200.5 million)

·       Net loss after tax of $367.5 million (2020: profit of $5.0
million) of which $227.5 million is a non-cash impairment charge ($167.4
million Syama announced on 27 August 2021)

·       Net debt reduced to $228.8 million including cash and bullion
of $88.6 million

·       Strong finish to the year with December production the highest
of 2021

·       $90 million sale of Bibiani completed - $60 million received
(August 2021 and February 2022)

·       2022 production and cost guidance: 345,000oz at an AISC of
$1,425/oz

·       COVID-19 vaccination programs fully vaccinated the majority of
workers

Note: All dollar figures are United States dollar (US$) currency unless
otherwise stated.

Resolute Mining Limited (Resolute, the Company or the Group) (ASX/LSE: RSG)
presents the Company's financial results for the year ended 31 December 2021.

Gold sales for the year were 316,464oz reflecting a 10% improvement in
production from the Syama Sulphide operations; a reduction in Syama oxide
production as operations transitioned to satellite pits together with an
extended wet season; and commencement of the cut back extension at Mako.

Revenue was $549.2 million generating an EBITDA for the year ended 31 December
2021 of $129.9 million. Non-cash impairments, fair value adjustments and
historical taxation charges (the majority recognised at June 2021) were
significant contributors to the reported net loss of $367.5 million after tax.

Resolute's CEO, Stuart Gale said, "our focus in 2021 has been around people,
system and process.  Pleasingly we now have a full complement of people
across our operations which included restructuring our employment practices to
adapt to the challenges of COVID-19.  In addition, we have implemented new
productivity initiatives such as MillSlicer at Mako, On Stream Analyser and
Cleaner Cells at Syama to improve the consistency and efficiency of
production.

"From an operational standpoint the cutback at Mako, which provides an
additional two years of production, has progressed well and we finished the
year strongly with December generating the highest monthly production across
each of Resolute's operations for 2021.  That momentum has been carried into
January and February 2022 and positions us well for the 35-day Roaster shut
which commenced on 18 February 2022. This is an important project for Resolute
which provides us with the opportunity to perform key plant improvement and
maintenance activities to deliver a more consistent level of production at the
Sulphide operations.

"The sale of the Bibiani Gold Mine in Ghana was completed during the year for
total consideration of $90 million.  $30 million was received in 2021, the
second $30 million tranche was received on 22 February 2022 with the balance
receivable on 19 August 2022. Proceeds from this transaction, together with
other asset sales, will be applied to reduce debt and strengthen our balance
sheet.

"Near mine exploration activity continued during 2021 resulting in a recently
announced 40% increase to the Mineral Resource Estimation for the Tabakoroni
deposit. Successful Oxide drilling programs were completed, resulting in
mining commencing at the Beta pit and additional prospects identified for
future drilling. Our exploration focus will ensure that we explore and
capitalise on our existing asset base.

"I would also like to take this opportunity to thank our Teams for their
support and contribution as we have implemented a number of initiatives across
our operations to safely improve performance while successfully managing
COVID-19 and maintaining production."

Sustainability

Resolute's TRIFR at 31 December 2021 increased to 1.25 predominantly driven by
an increase in hand and finger injuries.  Improving safe systems of work and
related training remains key to managing the health, safety and wellbeing of
the workforce. Initiatives supporting this include Critical Hazard Management
Standards implementation and delivery of high-risk training to embed
Resolute's safe systems of work.

In 2021, Resolute partnered with the governments of both Mali and Senegal to
source COVID-19 vaccines and has vaccinated approximately 2,000 employees and
contractors, representing the majority of the operational workforce.

Resolute supports local communities to deliver education, health, livelihood,
and economic value creation initiatives. This commitment also applies to
environmental stewardship and Resolute continues, in partnership with
stakeholders, to manage various conservation and biodiversity programs to
protect critical habitat and priority species over the long-term.

Operations Review

Syama Sulphide Operations, Mali

The Syama sulphide circuit delivered gold production of 135,618oz during 2021
at an AISC of $1,406/oz, a 10% increase in production compared to 2020 and 4%
reduction in AISC. Underground mining operations successfully transitioned to
owner-operator during the second half of the year. Ore mined increased to 2.2
million tonnes (Mt), 6% higher than the prior year. Milled tonnages increased
to 2.1Mt with record roaster throughput during the year, reflecting continuous
process system improvements including installing the On Stream Analyser and
Flotation Cleaner Cells.

Sulphide gold production was impacted by unplanned maintenance issues,
particularly in the crushing and milling circuits. Improvements in December
production have continued into January and February 2022, ahead of the 35-day
Sulphide shutdown, which is expected to deliver improved plant availability
and operational performance.

Syama Oxide Operations, Mali

Gold production from the oxide circuit for 2021 was 57,036oz at an AISC of
$1,501/oz. Mining was impacted by a prolonged wet season which impacted pit
access and haulage, together with mining of lower grade ore.  Despite this,
ore mined increased from 2020 to 1.35 Mt. Oxide mining transitioned to
multiple pit operations during the December quarter with material coming from
Tabakoroni Splay pit and the commencement of Beta pit to the north of Syama.
Oxide operations recording increased recoveries and production during December
due to higher grade ore being mined from Beta.

Mako Gold Mine, Senegal

Gold production at Mako totalled 126,617oz for 2021 at an AISC of $1,139/oz.
Operations at Mako were in line with guidance for 2021, reflecting the cut
back of the main pit, which is expected to be completed by the first quarter
of 2022 and provide access to deeper ore and extend the mine life. The
commissioning of the MillSlicer in the latter half of the year assisted in
optimising mill throughput, resulting in the highest throughput of the year in
the December quarter. Processing recoveries remained high at 92.2% during the
year albeit during a cutback period where lower grade material was processed.

Financial Performance

Revenue for 2021 was $549.2 million from gold sales of 316,464oz at an average
realised price of $1,733/oz compared to the average spot price of $1,800/oz.
EBITDA for the Group was $129.9 million in 2021. The reported net loss after
tax was $367.5 million, after non-cash impairment fair value adjustments and
historical tax charges. The table below sets out a reconciliation of Group
earnings for the year ended 31 December 2021.

 Profit and Loss Analysis                                   2021         2020
 ($'000s)
Group
Group
 Revenue                                                    549,242      602,985
 Cost of sales excluding depreciation and amortisation      (324,984)    (301,635)
 Royalties and other operating expenses                     (59,066)     (71,339)
 Administration and other corporate expenses                (16,809)     (18,634)
 Exploration and business development expenditure           (18,484)     (10,910)
 EBITDA                                                     129,899      200,467
 Depreciation and amortisation                              (120,993)    (175,331)
 Net interest and finance costs                             (11,741)     (22,522)
 Fair value movements and unrealised treasury transactions  (71,955)     16,143
 Other                                                      (3,481)      (884)
 Impairment expense                                         (227,464)    -
 Gain on disposal                                           2,707        41,475
 Net (loss)/profit before tax                               (303,028)    59,348
 Indirect tax expense                                       (24,760)     (24,308)
 Current Income tax (expense)/benefit                       (37,613)     (12,833)
 Deferred Income tax (expense)/benefit                      (2,069)      (17,212)
 Reported net (loss)/profit after tax                       (367,471)    4,995

(Note - 2020 comparative reflects the reclassification of NRV and inventory
adjustments of $47million, to align with the presentation in 2021)

Table 1: Financial Results for the year ended 31 December 2021

Key impacts on the financial performance during 2021 are set out below:

Sale of Bibiani

On 19 August 2021, Resolute completed the sale of the Bibiani Gold Mine to
Asante Gold Corporation for $90 million with $30 million received upfront, $30
million received on 22 February 2022 and the remaining $30 million due twelve
months following the date of completion (August 2022), a gain of $2.7 million
was recognised on this disposal.

Impairment

At 30 June 2021, Resolute recognised an impairment expense on the Syama cash
generating unit (CGU) of $167.4 million (refer to ASX announcement dated 27
August 2021). There is no additional impairment charge recognised on Syama at
31 December 2021.

At 31 December 2021, an impairment charge has been recognised on the Mako CGU
of $55 million as a result of the following:

·       Reduction of the tax exoneration period at Mako from 7 to 5
years. Resolute is currently working on resolving this matter with the
Senegalese government. Under the relevant accounting standards, in the absence
of a resolution, Resolute is required to assume an exoneration period of 5
years.

·       An increase in risk premiums that underpin the applicable
discount rate used in the impairment assessment.

There is no impact to Resolute's mine plans, gold reserves and resources, or
existing debt covenants. After recognising the impairment, the Group's
carrying value of net assets at 31 December 2021 is $425.6 million.

Fair value movements and unrealised gains

During the year, Resolute recognised $44.3 million of net realisable value
expense including $16 million of non-cash write down of low-grade stockpiles
at Mako. Additionally, $26.7 million of non-cash foreign exchange movements.

Tax

During the year, Resolute closed out several historical tax matters in both
Senegal and Mali with payments of $9.0 million of withholding taxes incurred
during the construction of Mako and the settlement of $3.5 million relating to
the acquisition of Tabakoroni.

Malian Tax Authorities offset carried forward VAT receivables, with tax
assessments for the 2015 to 2017 years resulting in a reduction in the Malian
VAT receivable balance of $56.6 million. The corresponding provision for the
same amount has also been reduced. This offset has also resulted in an
additional $21.0 million of historical Mali tax expenses which were previously
classified as a contingent liability.  Resolute continues to challenge these
assessments.

The Senegal Ministry of Mines has recently advised that it had not granted the
expected extension of the tax exoneration period from 5 years to 7 years
("Exoneration Extension").  Resolute is disputing this position and is firmly
of the view that it has satisfied all relevant grounds for the Exoneration
Extension to be granted, specifically the two year extension to the mine life.

Resolute is working with the Senegalese authorities to resolve this matter and
has received confirmation from the Minister of Mines advising that he will
review the Exoneration Extension.  Notwithstanding this, as required under
the relevant accounting standards, Resolute has recognised an expense of $3.4
million for income tax to reflect the shortened tax exoneration period.

Resolute continues to work with its in-country tax and legal advisors to
resolve additional contested tax claims of approximately $10 million.

Financial Position

Gross debt was reduced by 6% during 2021 to $317.4 million after taking into
account cash and bullion balances of $88.6 million, net debt reduced to $228.8
million. Figure 1 below provides a breakdown of Resolute's key cashflow
movement for the year ended 31 December 2021.

 

Please see image in the full version of the announcement at www.rml.com.au

Figure 1: 2021 cash and bullion movements

 

2022 Guidance

As recently announced on 20 January 2022, Resolute is forecasting total gold
production for 2022 of 345,000oz at an AISC/oz of $1,425/oz as follows:

Syama

2022 Sulphide production is forecast to increase by 7% from 2021 to 145,000oz
(2021: 135,618) at an AISC of $1,345/oz (2021: $1,406/oz). Sulphide mining
costs are forecast to decrease 19% compared to 2021 due to the saving expected
from the transition to owner operation development. These cost savings partly
offset the decrease in throughput due to the Sulphide shutdown.

2022 Oxide production is forecast to increase by 32% from 2021 to 75,000oz
(2021: 57,036 oz) at an AISC of $1,430/oz (2021: $1,501/oz). The improved
production is due largely to improved grades and increased ore mined,
partially offset by higher mining costs driven by increased material moved.

Mako

2022 production is forecast to be 125,000oz at an AISC of $1,325/oz. 2022
production guidance is broadly in line with 2021 production of 126,617oz. The
increase in the AISC to $1,325/oz (2021: $1,139/oz) is primarily due to
capital expenditure on a tailings dam lift and process plant enhancements,
along with non-cash drawdown of high-cost stockpiles.

For further information relating to the 2022 guidance, refer to ASX
announcement 20 January 2022.

Investor and Analyst Conference Calls

Resolute advises Chief Executive Officer, Mr Stuart Gale, will host two
Conference Calls for investors, analysts and media on Thursday, 24 February
2022, to discuss the Company's 2021 Financial Results for the full year ending
31 December 2021. Both calls will conclude with a question and answer session.

Details of each call and access links are provided below.

 

Conference Call 1 (pre-registration required)

Conference Call 1:        09:00 (AWST, Perth) / 12:00 (AEDT, Sydney)

Pre-Registration Link:
https://s1.c-conf.com/diamondpass/10020176-smss22.html
(https://s1.c-conf.com/diamondpass/10020176-smss22.html)

Participants will receive a calendar invite with dial-in details once the
pre-registration process is complete.

Conference Call 2 (via MS Teams Live Event)

Conference Call 2:        (MS Teams) 09:00 (GMT, London) / 17:00 (AWST,
Perth)

Attendee Link:              RSG MS Teams Live Event link
(https://teams.microsoft.com/l/meetup-join/19%3ameeting_OGZjNTkwMDQtNjFjZi00OWVhLTkyYTgtNTAyYjYyZWMyODEx%40thread.v2/0?context=%7b%22Tid%22%3a%2286b8d6e0-b316-429c-b704-47112106bbd0%22%2c%22Oid%22%3a%22795c270e-b0d7-417f-86a1-d6fc22179f9a%22%2c%22IsBroadcastMeeting%22%3atrue%7d&btype=a&role=a)

 

 

Contact Information

 Resolute                                                                       Public Relations

 James Virgo, GM Finance and Investor Relations                                 Jos Simson, Tavistock

 contact@rml.com.au (mailto:contact@rml.com.au)                                 resolute@tavistock.co.uk (mailto:resolute@tavistock.co.uk)

 +61 8 9261 6100                                                                +44 207 920 3150

 

 Media

 Cameron Morse, FTI Consulting

                                                                              Corporate Broker
 cameron.morse@fticonsulting.com (mailto:cameron.morse@fticonsulting.com)

                                                                              Varun Talwar, Berenberg
 +61 433 886 871
+44 203 753 3039

Public Relations

Jos Simson, Tavistock

resolute@tavistock.co.uk (mailto:resolute@tavistock.co.uk)

+44 207 920 3150

 

 

Corporate Broker

Varun Talwar, Berenberg

+44 203 753 3039

 

 

 

 

 

 

A full PDF version of the announcement is available from the Company's
website: link to announcement
(https://clients3.weblink.com.au/pdf/RSG/02490904.pdf) .

Competent Persons Statement

 

For the purposes of ASX Listing Rule 5.23, Resolute confirms that it is not
aware of any new information or data that materially affects the information
included in the original market announcements relating to exploration results
or estimates of Mineral Resources or Ore Reserves referred to in this
announcement and, in the case of Mineral Resources and Ore Reserves, that all
material assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not materially
changed. Resolute confirms that the form and context in which the Competent
Person's findings are presented have not been materially modified from the
original market announcement.

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 which forms part of UK law pursuant
to the European Union (Withdrawal) Act 2018. Upon the publication of this
announcement via a Regulatory Information Service (RIS), this inside
information is now considered to be in the public domain.

 

Authorised by Mr Stuart Gale, Managing Director & CEO

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