Yes monetising Ravenswood opens up the free cash flow potential of Syama and gives the company the ability to more quickly expand that project from 2.4Mt/annum to 4Mt/annum (not including the oxide circuit) which adequately compensates for the loss of the expected production profile from Ravenswood both in terms of scale and longevity. There are 2.7M ozs of resources at Syama UG that are available to be converted to reserves so the "loss" through the sale of Ravenswood's 1.7 million ozs in reserves are inconsequential to the RSG story. Why waste money building capacity in the wrong place. Ravenswood just represents the doubling up of capacity, the doubling up of CapEx spend to achieve what would be achievable for a far lower cost if that CapEx was applied to Syama UG mine and processing plant. It is far easier to scale the Syama UG mine and sulphide processing circuit than building all that new capacity at Ravenswood in terms of fixed infrastructure, mining fleets and stripping costs. The most important ratios for investors IMO are Production per Net Assets and Production per Free cash flow, both these ratios would be immediately enhanced by the sale of Ranenswood.
The 500koz/annum production level is just a platitude to keep lazy analysts at institutions interested. Let's them off the hook from really thinking. Increased production for increase production's sake has been proven to be the road to building a weak gold company in the past. I'd rather fall a little short of this target with a high margin and a longer life group production profile than make the target and wear the drag of higher costs and debt and a longer pathway to free cash flow. If it was up to me I'd take what I can get for Ravenswood. It's not going to fetch more than about $187.5 million and we are unlikely to get that all in cash. An offer that values Ravenswood at about this level with a decent cash component over about $75 million should be seriously considered IMO.
As far as Loki goes and as I've explained before he is very knowlable and should be listened to. I put him on ignore because I personally was not happy with his recent views on the direction of the gold price and his general negativity when it comes to most gold stocks in general. I am a convection investor and base my own investments on my own calls, not those of others. If my calls fail I know who to blame. I simply didn't like having to answer views that I didn't see as adding depth to my understanding so he is easier on ignore for me. As for the other guy I haven't regretted the ignore feature for one minute.
There is a time to buy every stock and there is a time to fold. RSG has far too much potential and has come to far to have it in the fold category. It is a buy in my opinion for people who believe in the potential, understand the remaining risks and the story and it's a wait and see for people who don't fully understand the potential or who are just more cautious. The next 6 months will reveal a lot but not everything. Once Syama starts proving itself nothing will stop this company short of civil war.
One good thing to come from this announcement is the confirmation that Ravenswood will remain in production in its current shape until the end of 2019 with continued mining at Mt Wright targeted to late 2019 and processing of Nolan's East stockpiled ore and other low grade stockpiles until the end of 2019. As long as this production stays cash flow postive we have some breathing space in which to sell the development project at Ravenswood. Esh
RSG Price at posting:
$1.14 Sentiment: Buy Disclosure: Held
(20min delay)
