Resolute Mining Ltd Drops 6% on Project Extension

Resolute Mining Ltd [ASX:RSG] is a gold miner operating mines in Africa and Australia. This morning, RSG dropped 6.69%, to a low of $1.25.

What happened to Resolute Mining shares?

RSG received approval to recommence mining at the Sarsfield open pit. It’s just one of the pits within the company’s Ravenswood Gold Project. Ravenswood is 95kms south-west of Townsville, Queensland. It has several pits, like Sarsfield, that RSG plans to open.

Approval for Sarsfield was ‘…a major milestone in the governmental approval process,’ RSG stated. The company’s local operations will extend another 13 years. This will increase the average annual gold production to more than 120,000 ounces.

What now for the RSG share price?

Strangely, investors didn’t think approval for the Sarsfield pit was beneficial for the gold miner. But boosting annual gold production is good news, right?

John Wellborn, the managing CEO of RSG, said:

The next stage of our expansion plans require approval to recommence mining activities at the Sarsfield open pit mine before advancing to the adjacent Buck Reef West deposit.

The company aims to have approval for Buck Reef West by mid-2018.

RSG is currently trading at a price-to-earnings ratio of 6.22-times. Compared to their peers, RSG is trading at a discount. But that doesn’t mean you should buy.

It really depends on how you think their Ravenswood Extension Project will pan out. If you believe it will significantly add to earnings, then you might want to think about buying RSG. If not, then add it to your watchlist.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: We likely won’t see another turnaround in resources like we did in 2016. And if we do, it could be a long time from now. Unless commodity prices suddenly move higher, earnings will likely stagnate.

That’s why some investors prefer the smaller end of the market.

Smaller miners like Resolute Mining are a riskier investment, there’s no running away from it. But they can potentially grow earnings 10-fold in a short space of time. Resource specialist Jason Stevenson is no stranger to explosive resource stocks.

In his advisory service, Resource Speculator, Jason has made gains of 142%, 145% and 242%.

To find out more, click here.


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