RSG 0.00% $1.36 resolute mining limited

syama & option differential

  1. 134 Posts.
    RSG holders,

    Exceptional returns of late on both the ordinaries and the options, on increasing average volume. As i said in a previous post, resolutes hedge book for 2004 financial year is a shocker and the realised gold price will be substantially below current spot prices. With this in mind the surge in the stock price relative to other gold stocks to me is indicative of company-specific factors. The lastest financial report had nothing new to report which was already known by analysts, thus it seems the massive surge is indicative of resolute's option on Syama. Obviously higher spot prices increase the chances of a positive outcome on Syama, hopefully the share price movements are not just speculative but represent a possible favourable announcement. Interestingly, resolute only have an option for 12 months on this project, thus the option expiry on Syama occurs around a year before the expiry of the RSGO options - would have been great if resolute had the option for 2 years as the money raised from the RSGO options (provided they expire in-the-money) is well sufficient to cover the exercise price and assumed debt for Syama.

    Comparing the closing price of the ordinaries and options, the options only have a time value of only 2 cents (5%) for 22 months of expiry. If you are after leverage that is pretty much unsurpassable, however obviously the risk is much greater particularly after such a huge run-up which is why i think the time value has shrunk to nearly zero. I wouldn't be surprised if the ASX issues a speeding ticket to RSG if this continues.

    I own both RSG and RSGO, however the temptation is there to liquidate RSG and buy equivalent amount of RSGO and release the surplus capital for other investments. For the time being i think i will maintain my each-way bet, reason being that if a negative announcement on Syama was released, the current price on RSG in my opinion is unjustified and i would be looking to exit and purchase another gold stock, and the problem with being stuck with a shitload of RSGO options is the liquidity.

    Cheers



 
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