With the business potentially at an important milestone, we thought we'd take a closer look at Resolute Mining Limited's (ASX:RSG) future prospects. Resolute Mining Limited engages in mining, exploration, development, operation, and production of gold properties in Africa, the United Kingdom, and Australia. The AU$243m market-cap company announced a latest loss of US$319m on 31 December 2021 for its most recent financial year result. The most pressing concern for investors is Resolute Mining's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Resolute Mining is bordering on breakeven, according to the 3 Australian Metals and Mining analysts. They expect the company to post a final loss in 2021, before turning a profit of US$125k in 2022. So, the company is predicted to breakeven approximately a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 97%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Resolute Mining given that this is a high-level summary, but, keep in mind that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Resolute Mining is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Resolute Mining's case is 74%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Resolute Mining, so if you are interested in understanding the company at a deeper level, take a look at Resolute Mining's company page on Simply Wall St. We've also compiled a list of key factors you should further examine:
Valuation: What is Resolute Mining worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Resolute Mining is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Resolute Mining’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.