Hi Nordesmic, thanks for your commentary, you have indicated Regis as a company in recovery with potential could you give me your insights to what has changed for them considering the challenges they have been experiencing. Between the Line June report your commentary stated;
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The main losers this year have been Beadell Resources and Regis Resources with both companies having issues at their open pit operations. The market looks to be questioning their ability to meet long term production forecasts. For Beadell the questions relate to whether it can mine enough ore in tropical conditions. Regis has had grade and metallurgical issues at Garden Well, its largest mine and the majority of its reserves".
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@Theron thought I'd reply to your question here.
Regis had been struggling to get consistent production going and the market was worried that there would be persistent issues at Garden Well. Regis' solution was to remove the difficult section of the ore body from the reserves. Of course this means there is less mine life but it also removed a lot of the uncertainty and allowed Regis to clearly state production targets that were tangible and achievable, 300,000 oz at A$1000. They are churning out cash with those costs and were actually making plenty of money earlier in the year but the uncertainty seemed to win out.
At the same time management announced a couple of clever initiatives to boost the share price, a dividend of 6 cents for the half and a buy back. The buy back so far hasn't been used but it did force some shorting the stock to cover their positions. The dividend means the company is on a yield of around 5% which perhaps attracts interest from investors from outside the gold space as well.
So those were the steps to get the company back to a neutral position which in my view is a move back to the current price. Now the next steps will be growth and the exploration campaign going on I think has the potential to really boost mine lives and also some of the grades. Grade is important for Regis because Moolart Well and Garden Well are below 1 g/t. The Gloster deposit near MW has 365000 oz at 1.37 g/t. If they can get say 50.000 oz per year out of this replacing some of the lower quality MW feed then it could boost production by 30,000 oz per year for the company and put mine life out another 4 or 5 years. I'm just doing back of the envelope stuff in my head here and it does need to be re classified for the new JORC code but there is some great potential. They can also use any of the satellite deposits at any of the plants so there is heaps of flexibility.
Expect some resource announcements in the next couple of weeks that will have more detail and perhaps explain how the resources can be fed into the mine plan.
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