Monday 11th November 2024:

Source: RSG-Company-Statement-regarding-Mali.PDF [11-Nov-2024: 9:20am]

Disc: Not holding RSG, as they have been at the top of my "avoid" list for Aussie gold companies working in West Africa, due to the significant sovereign risk there plus the sub-par track record of RSG management who have consistently failed to provide adequate TSRs for their shareholders, and part of that stems from a lack of competency to handle and mitigate risk in West Africa.

I hold Perseus (PRU) - and their performance over the years has been so far ahead of Resolute (RSG) that you would never guess they both operate in the same part of the world. Chalk and cheese.

If you think sovereign risk in gold mining outside of Australia is overblown, then what has happened to RSG over recent days in Mali and what had previously ocurred with Kingsgate (KCN) in Thailand should be kept front of mind when considering such companies as prospective investments. Danger Will Robinson, Danger!!

Hey @Chalky1610, I thought that short data had at least a two day lag - does that sound about right to you?  If anything, I would have thought that shorting would have increased with RSG since the Ghanaian government terminated their Bibiani lease.  As you and I have mentioned, they were not operating that mine, it was shut down, and they hold sold it, pending approvals from the Ghanaian government, which were obviously not forthcoming, however it's the sort of thing that shorters usually latch onto. 

RSG looks particularly cheap to me now, considering they have two good operating mines that are not in Ghana.  However, not cheap enough for me to buy them, simply because I do not like the West Africa exposure.  For people who have a higher risk tolerance and are happy enough with an ASX-listed gold producer operating in Mali and Senegal, RSG might be a good opportunity, particularly after this recent sell-off.

25-Mar-2021:  The announcement by RSG after the market closed yesterday evening is another reminder of the sovereign risk attached to companies operating in West Africa and other risky areas of the world.  In RSG's case, they only had one mine in Ghana (Bibiani) with their main gold mine, Syama located in Mali and their Mako Gold Mine in Senegal.  During the December 2020 quarter Resolute Mining (RSG) had announced that they had reached an agreement to sell the Bibiani Gold Mine for US$105 million in cash to Chifeng Jilong Gold Mining Co. Ltd (Chifeng). Proceeds from the sale were to be used to repay debt and strengthen Resolute’s balance sheet.  Debt is an issue for RSG, and this sale now falling through will be a big blow to them.  They were obviously keen to exit Ghana and now we know why. 

The proposed sale of the Bibiani Gold Mine to Chifeng, a Chinese company, could be a factor in the move by the Ghanaian Minerals Commission (on the instructions of the Ghanaian Honourable Minister of Lands and Natural Resources) to immediately terminate the Bibiani Mining Lease.  A change-of-control event could be reason enough for the Ghanaian Government to make that move. 

I have mentioned several times in various posts here that there are governments around the world who will quickly move the goalposts, change the rules, whatever you want to call it, and leave a company that has spent years building up a site and a resource with nothing to show for it except a long drawn-out court process and associated legal costs.  It happened to Kingsgate (KCN) who were trading at over $8/share in 2011 and are now trading at just over 80 cents per share.  Their Chatree mine in Thailand was closed at the end of 2016 amid allegations of bribery springing from an anti-corruption probe into Kingsgate's Thai operations.  You can say, "well, if they don't do anything wrong, and follow all of the local rules, they should be OK."  Yes, they should be, but they often are not.  The rules can be changed.  New rules pop up.  The legal framework is vastly different in some of these countries and the government of the day often has enormous power.  And the government can change.  So any agreements made with the previous government can be worthless.  It can be very risky indeed.

This once again reinforces that Perseus (PRU) is the superior exposure on the ASX to West African Gold.  I don't hold either PRU or RSG, because I like my gold miners to have the majority of their mines here in Australia.  I do not like gold miners who operate in West Africa, Indonesia, Malaysia, Thailand, the Philippines, or most of South Amercia.  PNG is also risky, but I do hold SBM who have one mine in PNG and the others in Australia and Canada.

Sovereign Risk - it's real, and it can make a company go from hero to zero quite quickly.

 Bibiani Gold Mine Update

Resolute Mining Limited (Resolute or the Company) advises that it has today received a letter dated 23 March 2021 from the Ghanaian Minerals Commission advising that, on the instructions of the Ghanaian Honourable Minister of Lands and Natural Resources (the Minister), the Mining Lease for the Bibiani Gold Mine stands terminated. The Company has been advised to cease all activities and operations at the mine site.

This action is unexpected and Resolute is seeking clarification from the Minister’s office for the rationale for the termination. As a result of this notice Resolute is currently seeking legal advice on the validity of the notice, its rights of appeal and potential recourse while considering the impact of the notice on the sale agreement with Chifeng Jilong Gold Mining Co. Ltd for the sale of the Bibiani Gold Mine.

Note~ My highlights...this came through at 6:53 last night.....

Hey Bear77, another reason to have assets here in AUS