Resolute Mining Limited (ASX:RSG) Is Expected To Breakeven In The Near Future

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$273m market-cap company posted a loss in its most recent financial year of US$319m and a latest trailing-twelve-month loss of US$160m shrinking the gap between loss and breakeven. As path to profitability is the topic on Resolute Mining's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Our analysis indicates that RSG is potentially undervalued!

Consensus from 4 of the Australian Metals and Mining analysts is that Resolute Mining is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$25m in 2024. The company is therefore projected to breakeven around 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 87%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Resolute Mining given that this is a high-level summary, though, bear in mind that generally a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. Resolute Mining currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Resolute Mining's case is 67%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Resolute Mining to cover in one brief article, but the key fundamentals for the company can all be found in one place – Resolute Mining's company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

1. 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.
2. 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.
3. 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.