The Resolute Mining Limited (ASX: RSG) share price looks dirt cheap following its full year profit result…or is it undervalued?
Here are the key takeaways from the $790 million gold miner's unaudited financial result:
- Revenue from silver and gold sales was $541 million, down from $555 million
- Gold production was 329,834 ounces, with all-in costs at $1,132 per ounce
- Average gold price was $1,717 per ounce
- Net cash/bullion position of $248 million
Looking at those figures and comparing it to the market capitalisation (i.e. the value of all shares in the company) Resolute has a price-to-profit ratio of less four times once cash is taken out. That's cheap, relative to its peer group.
"Over the last two years we have consistently outperformed on both production and costs and have generated profits of circa A$350 million," CEO and Managing Director, John Welborn, said. "Resolute is well advanced on delivering on an industry leading organic growth profile with a focus on low cost, long life gold mines."
Resolute Mining will release its decision on the full-year dividend later in the month on August 24th. With the company's unique policy of paying eligible shareholders' dividends in gold, it reaffirmed its aim of releasing capital of at least two cents per share.
Resolute: Cheap or undervalued?
An important distinction most investors fail to make is the difference between cheap and undervalued. Undervalued is what you are looking for because it implies a return to more normal levels of valuation.
Cheap companies have a habit of staying cheap.
It is hard to tell if Resolute shares are cheap or undervalued at current levels. However, it is a higher risk investment proposition at the very least. Therefore, until the audited full-year results are released I think it will pay to remain patient and keep its shares on your watchlist.
