Red 5 Ltd (ASX:RED) has published its full-year financial results, detailing a period that saw the gold explorer, producer and project developer bring in $173.4 million in sales revenue.
Over the 2021 financial year, Red 5’s Darlot Gold Mine produced 76,104 ounces of gold, while the ASX-lister sold 75,907 gold ounces — statistics which guided the materials stock into positive operating cashflow territory.
As it heads into the new financial year, Red 5 is putting all of its energy into bringing the King of the Hills project online.
The Eastern Goldfields asset is one of Australia’s largest gold plays by ore reserve and is poised to enter production in the first half of next year.
Developing Australia’s next major gold mine
Commenting on Red 5’s full-year financial results and outlook, managing director Mark Williams said: “The past financial year has been an important period of development, growth and operational transition for Red 5, laying the foundations for the company to achieve its objective of becoming a leading mid-tier Australian gold producer.
“This will be underpinned by the successful development and delivery of what is expected to be Australia’s next major gold mine – our flagship King of the Hills (KOTH) project in WA’s Eastern Goldfields.
“The company posted positive operating cash-flow, underlying earnings before taxes, interest, depreciation and amortisation (EBITDA) and gross profit from the Darlot Operations for the year, despite the challenges we experienced during the year with the ramp-up at the Great Western open pit and mining remnant material at Darlot.
“Looking ahead, our key focus is the completion and start-up of the KOTH Project and the implementation of our new Darlot mine plan and KOTH Hub Strategy.
“Together, this will see Red 5 elevated as a mid-tier gold producer and will mark the beginning of an exciting new chapter in our history.”
Financials
Over the course of FY21, Red 5 primarily worked to advance its KOTH asset towards first production.
The gold explorer, producer and project developer expensed $79.5 million on the project’s construction over the financial year as it works towards producing first gold in 2022’s June quarter.
Gold sales totalled 75,907 ounces for the year, underpinning the company’s $173.3 million sales revenue result.
Red 5 also recorded a $2.3 million gross profit from operations and a net loss from continuing operations after income tax of $9.5 million. After adjusting for discontinued operations at the Siana Gold Project, the net loss increases to $43.2 million.
In terms of earnings, underlying EBITDA for the financial year came in at $11.7 million, while Red 5 ended the period with $21.4 million in cash and bullion to support future operations.
Notably, King of the Hills is fully funded to production under a $175 million syndicated facility agreement with a suite of major banks.
A further $28.5 million in restricted cash is on the books under the debt financing arrangement for the Eastern Goldfields asset.
Key activities
Over the financial year, Red 5 progressed construction across the KOTH’s workforce village, advanced bulk earthworks activities and completed the asset’s final feasibility study.
The project developer also awarded Macmahon Contractors the KOTH mining services contract following a competitive tendering process.
King of the Hills boasts a 16-year mine life, a 4.1-million-ounce mineral resource and a 2.4-million-ounce ore reserve, which the ASX-lister intends to continue evolving over the years to come.
Meanwhile, up to June 30, 2021, Red 5’s Darlot processing plant produced 76,104 ounces of gold from 984,220 tonnes of ore, which was processed at an average head grade of 2.63g/t gold.
In the first half of the financial year, ore was sourced from the Darlot underground mine and KOTH’s underground mine.
However, from the March quarter of 2021, the KOTH underground mine was placed on care and maintenance in a bid to preserve the ore for processing through the new King of the Hills processing plant.
As a result, the mill feed from KOTH was replaced by ore from the Great Western satellite open pit.
Outside of WA, the ASX-lister searched for a buyer for its Siana Gold Project in the Philippines, with a US$55 million divestment announced last month.
Looking ahead, Red 5 will continue to advance work towards production at KOTH, with the all-important 50% completion milestone passed earlier this month.
Commissioning at the asset is targeted in eight months’ time, while the company’s Siana Gold Project sale should finalise in September.