RRL’s 1QFY25 preliminary production result was lower than we had expected, with strong performance at Tropicana more than offset by lower volumes at Duketon. We suspect the weaker volumes reflected reduced low-grade stockpile processing in the final period for Duketon North. These ounces add little to cash generation and we note that RRL’s reported cash and bullion at the end of quarter was in line with our estimates, implying an A$85m cash build for the period. We had trimmed our FY25 production forecast to 360koz, however our estimates remain within FY25 guidance ranges for both production and AISC. We expect RRL to produce between 360-375kozpa over the next five years. This should generate ~A$2.0b in free cash flow using Argonaut gold price forecasts and spot prices. We reiterate our BUY rating and A$2.70 price target on RRL, noting that the stock is trading on average free cash flow yields of ~30% for FY26-FY28 using Argonaut Gold price forecasts and ~25% at spot prices.
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