Ramelius Resources (ASX: RMS) has reported a proposed return of capital to shareholders of 5 cents per share based on better-than-expected gold production at its Wattle Dam mine in Western Australia.
The capital return is subject to shareholder approval and a favourable class ruling from the Australian Taxation Office (ATO) in regards to the taxation treatment of the payment.
Based on Ramelius’ current 291.3 million ordinary shares on issue, the proposed capital return to shareholders totals A$14.5 million.
Ramelius has recently reviewed the ongoing excellent performance of the Wattle Dam underground gold mine since production commenced in the December 2009 quarter.
During the period to 31 March 2010, gold production was 36,497 ounces at an average grade of 28.35g/t (including low grade ore) which generated total gold sales of $33 million for the period to 31 March 2010.
The proposed capital return is considered appropriate because of the performance of the underground mine at Wattle Dam. It has outperformed the expected mine plan and as at 31 March 2010, total gold sales from the mine exceeded all capital and operating costs since the underground mine development commenced in May 2009.
The company does not presently have any substantial capital expenditure requirements in its future plans that cannot be funded from internal cash flows.
Also, Ramelius does not currently have any significant franking credits to allow for a franked dividend to be paid in the near future.
At this time, the company is still pursuing a quality acquisition in the gold sector, and therefore intends to hold a significant cash balance to enable Ramelius to participate in any such opportunities that may arise.
However Ramelius will only make such an acquisition if it can demonstrate significant upside potential beyond the nominal acquisition price.
In the meantime, the company will continue with its strategy to extend the mine life at Wattle Dam and work towards making a significant gold discovery in world-class gold regions in Australia or overseas.
The company currently has approximately A$80 million in cash and gold on hand and remains debt free.
Ian Gordon, Chief Executive Officer, said the company plans to hold a meeting of shareholders as soon as possible to approve the capital return and to then apply immediately thereafter for a class ruling from the ATO.
The capital return will be paid as soon as possible after a favourable class ruling is received from the ATO.