Essays on Credit and Lending Decisions - Resolute Mining Limited Case Study

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The paper "Credit and Lending Decisions - Resolute Mining Limited " is a good example of a finance and accounting case study. Resolute Mining Limited is a potential borrower looking forward to obtaining a loan from Solutions Plus Bank amounting to $30 million. This amount if granted will be used to fund the exploration of potential gold mines near re-developed mine (Syama) in Western Africa. Resolute Mining Limited is a gold mining firm which is also engaged in exploring and prospecting for minerals in Africa and Australia. The firm primarily has interests in the gold sector and runs three mines of gold.

The company controls 80% of the interest in Mali’ s Syama gold mine, full control over Ravenswood Gold Mine situated in North-east Queensland in Australia and full control over Tanzania’ s Golden Pride gold mine (Finance. yahoo. com, 2012). The firm is listed in Australian Securities Exchange limited with a Ticker Symbol RSG and a market capitalization of about AUD 1.03 billion (ASX, 2012). The firm was founded in 2001 and its registered offices together with a business address are; 4th Floor, The BGC Centre 28 The Esplanade Perth, Western Australia 6000 Postal P. O.

Box 7232 Cloisters Square Perth, Western Australia 6850 Telephone: +61 8 9261 6100 Facsimile: +61 8 9322 7597 E-mail: contact@rml. com. au Source: Resolute Mining Limited, 2012. The firm is currently owned by institutions and mutual funds, who own 349.30 million and 568 million respectively. The insiders do not have any ownership in the firm (Morningstar. com, 2012). The list of major shareholders is as shown in the Appendix1. Borrower’ s overview Resolute Mining Limited continues to create more value to the shareholders by the use of its strengths as a successful operator and developer of good gold with high-quality projects over its life.

The firm’ s projects have to date yielded approximately 6 million gold ounces. The firm is aggressively advancing its projects portfolio as well as evaluating innovative opportunities to improve the shareholders’ value (Resolute Mining Limited, 2012). The firm is presently changing due to significant rise in cash flows; this will see the firm emerge as an unleveraged and non-hedged gold firm with finances to meet its growth objectives and increase shareholders’ returns. This is an important shift from the firm’ s current position in the last few years and puts the firm on a going concern basis (Resolute Mining Limited, 2012). The firm expects to produce approximately 410,000 gold ounces in its three mines in the future, which represents a 20% rise on 300,000 ounces that were produced in the latest period.

Significantly, the average cash cost of the group is anticipated to drop from $908 every ounce of the previous period to $730 per ounce (Resolute Mining Limited, 2012). The combination of low cash costs and superior production together with superior gold price transforms to the strong generation of cash.

This enables the firm to push harder its organic growth possibility with the intention of adding value to the shareholders. The firm’ s improved production viewpoint is motivated by Syama operation. Good grades are anticipated in the future leading to the main boost in production as well as a decrease in the cost of cash per ounce in its operation. Golden Pride and Ravenswood are anticipated to perform the same as the last period (Resolute Mining Limited, 2012). The firm is planning to undertake significant progress on various development projects which will enhance its long-term cost structure and production profile.


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