Ann: Half Yearly Report and Accounts, page-34

Regis down after dumping dividend

One spot in the resources sector that did enjoy the volatility today were the gold miners.

Gold rose 0.5% to US$1908/oz this morning as news broke of Putin’s latest move in the chess game over Ukraine.

Northern Star (ASX:NST) was the big mover, climbing 4.22% or 41c to $10.11, its strongest share price since November.

Australia’s second biggest gold miner has ridden Russian jitters to a more than 13% gain over the past week.

On the flip side Regis Resources’ (ASX:RRL) earnings today continued an uncomfortable trend of underperformance from Australian gold miners with ageing assets and rising costs.

A regular dividend payer for several years, Regis dumped its payout for the first half of 2022 despite consensus expectations of a 3.3c per share distribution.

It came as underlying NPAT fell from $78 million in H1 2021 to $44m in H1 2022 and EBITDA fell from $233m to $221m.

Regis has been hit by rising costs and a rockfall at its Duketon operations that prompted a guidance downgrade last month, while the approvals process and financial investment decision at its McPhillamy’s project in New South Wales continues to drag on.

Regis boss Jim Beyer indicated the company, which also paid $900 million for 30% of the Tropicana gold mine in WA last year, would be maintaining its cash for capex demands and would review a full year dividend later down the line.

The company is expecting a turnaround in fortunes in the second half, but faces a number of challenges including the potential growth of Omicron Covid outbreaks in WA where its two mining operations are based.

“It has been a difficult first half for us, it’s very clear and without wallowing around in it, you can see what’s happened over the last six months or so. We don’t have a policy on dividend payout or dividend ratios,” Beyer told analysts on a conference call.

“We will consider at the end of this half how the business has performed. We will be looking at what the outlook is for gold price. I mean it’s certainly very strong at the moment which is pleasing to see.

“I’m not sure whether some of the reasons behind that is … always instability gives us a strong gold price. But we will look to see how the longer term capital demands are for the business. Clearly there’s McPhillamy’s sitting out there so we will take a look at this in six months time, five months time.”

Regis delivered 210,270oz of gold for H1 FY22 at an AISC of $1,527/oz, with full year guidance of 420-475,000oz at $1,425-$1,500/oz.

RBC’s Alex Barkley told clients the loss of the dividend would be a short term shock, but for the mid-tier pursuing growth options should take preference over payouts.

“We see value accretive growth options as an appropriate preference for funding,” he said.

RBC has a $2.25 price target and outperform rating on the $1.5b capped gold miner.