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Resolute Mining (RSG) - A Transitional Year Ahead

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Resolute Mining (RSG) delivered an in-line June Q, producing 71koz (-18% Q-o-Q) at an all-in sustaining cost (AISC) of A$1,502/oz (-45% Q-o-Q). The higher cost June Q was driven largely by Syama sulphide production coming largely from stockpiles at lower grades and recoveries than the March Q and lower milling of open pit sulphide ores from satellite deposits. Syama Q4 gold production declined by 32% to 47koz at an AISC of $1,558/oz. At Ravenswood, production improved to 24koz (+22% vs Q3) and costs fell to A$1,300/oz (-20% vs Q3) after higher proportions of Mt Wright saw head grades lift by 7% vs Q3. FY17 gold production finished the year with 330koz (vs Argonaut 309koz) at an AISC of A$1,130/oz (vs guidance of $1150/oz and Argonaut forecasts of A$1,028/oz). Underground ores continue to ramp up as mining pushes ahead with the Syama sub level cave development now feeding development ore into the production profile. After incorporating FY18 guidance into our model we revise our target price to $1.40ps (prior $1.53) and we maintain our BUY recommendation.

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