Companies having to report in the current financial situation find themselves in uncharted waters. While Red Rock Resources (LSE:RRR) is no exception, the firm has provided investors with a lot to be optimistic about with a strong set of results and a clear action plan for the coronavirus epidemic.
In half yearly results to 31 December 2019, released to the market on 31 March 2020. Red Rock reported a diluted profit per share of 0.047p, compared to a 0.053p loss over the same period in 2018.
The gold, manganese and battery metals developer also shaved its losses from £2.085 million the previous year to £227,000, reporting a profit before tax from operations of £337,000, compared to a loss of £283,000 from the same period last year.
Chairman Andrew Bell had said in a separate RNS that the coronavirus pandemic “has shaken up the kaleidoscope so effectively as to change every market and every part of the world economy: today they all look different. The impact of these changes has been almost universally negative in the short terms, with the strength in the gold market a rare exception.”
But extensive central bank actions to flood the market with liquidity has the potential to create several benefits, Bell said. One of these already evident is in the growing demand for gold. “From this point forward the company sees upside potential rather than a potential for more downside surprises,” he added.
The US Federal Reserve has taken unprecedented action to inject trillions of dollars into American markets, and Congress has agreed a bill to hand $1,200 to families in a bid to restart an economy that has ground to a halt. The Bank of England, too, went all-in to drop interest rates to 0.1%, the lowest in the 300-year history of the institution.
Red Rock said its positioning in gold and battery metals was “well-adapted” for the return to market stability, when that occurs. In particular, its 17 million-share holding in low-cost ASX-listed manganese producer Jupiter Mines (ASX:JMS) would provide ongoing cash flow and “continue to provide support for its asset value”.
From a price trading in a fairly tight range around 45p in late January, RRR shareholders have seen their shares drop by around 60% to 16.5p today – a similar figure to all of its junior mining peers. Despite this, Bell thanked shareholders for their calm and support at what is a difficult time for all investors.
As with most miners, Red Rock has not been able to visit any of its overseas enterprises because of near-total travel restrictions due to the coronavirus pandemic.
One of its main interests is in Democratic Republic of Congo. Here, planning for a new stage of exploration on the 80%-owned Luanshimba license continues, the company said. This resource is prospective for copper and gold.
The recent 21-day lockdown in South Africa also affects the Tshipi Borwa manganese mine, 49.9% owned by Jupiter Mines, which has closed.
“We note the recovery of economic activity and demand in China, evidenced by the return of normal conditions in the manganese market and the increasing manganese price over recent weeks. China needs manganese, and particularly South African manganese, for its steel industry and to avoid shortages it is necessary that production resumes after the shortest possible delay,” Bell said.
Jupiter’s Q4 results to 24 February 2020 said Tshipi had hit its targets for the full year, exporting 3.4 million tons of Manganese ore. The junior miner also announced a ZAR265 million dividend, which RRR will benefit from as a shareholder.
The manganese price for 37% Mn FOB Port Elizabeth has recovered from $2.70/DTMU in late 2019 to $3.34/DTMU, Bell added, saying: “This must reflect a degree of restocking as China starts to resume large scale industrial activity and steel production.”
Less affected by the virus outbreak so far is Kenya, because of early and proactive measures taken by government to prevent the spread, Bell noted.
Here, Red Rock has a 75% direct interest in Mid Migori Mining Company, which controls a 1.2Moz JORC gold resource.
Author: Mark Sheridan