Regis Resources (ASX:RRL) has arguably been the largest casualty...

Regis Resources (ASX:RRL) has arguably been the largest casualty of the trend that has seen investor turn up their noses at gold miners who have, god forbid, been making boring old profits this year.

The Duketon gold mine owner, a long term dividend payer and reliable gold producer which has tipped more than $532 million into shareholders’ pockets since 2013, has become a poster child for the market’s ambivalence towards the Australian gold sector.

$1.33 billion capped Regis has seen its shares tumble in 2021, falling almost 53% to $1.76 as investors have baulked at the $900 million it tossed IGO (ASX:IGO) for a 30% stake in the Tropicana gold mine and persistent approval delays at the 200,000ozpa McPhillamys project in New South Wales.

Could it be due for a rebound?

RBC Capital Markets analyst Alexander Barclay thinks so, naming Regis as the Canadian investment bank latest “outperform” in the gold space.

RBC has favoured Northern Star (ASX:NST) and Silver Lake (ASX:SLR) in the gold space this year, both 2021 losers.

But the gold sector’s fortunes could cycle back in 2022. Societe Generale and TD Securities both expect gold to hit US$1900/oz (around US$120/oz above current levels) in 2022 as inflation and political instability rises.

Barclay says Regis has “rare value” based on its growth profile and the big fall in its share price, saying it is trading a a “considerable discount vs its history and peers”.

Mine life extensions, growth on the horizon

Despite reducing Regis’ price target from $2.75 to $2.50, Barclay views the miner as an outperform with 80% upside to both its three year EV/EBITDA multiple and peers.

He views Regis as cheap given its growth outlook which could see gold production increase by 32% from FY22 to FY25, and said RBC sees as much as 43% upside to the gold producer’s $2.50 price target.

One of the big triggers would be a regulatory decision expected on McPhillamys in early 2022, which Barclay estimates will add 20c to its share price and 190,000ozpa to its production profile once the mine is built.

On top of that, Barclay says exploration drilling results from its Duketon and Tropicana assets have put questions around mine life to bed. A resource and reserve upgrade in April next year “could be a positive catalyst”, he reckons.

“RRL already trades at a size discount for its ~500kozpa. McPhillamys approval would draw further attention to this valuation gap,” Barclay said.

“RRL discount driven by backwards thinking: The Tropicana acquisition may have been an overpayment, but has since strengthened RRL’s portfolio.

“Hedges are down to a manageable 295koz at Q1FY22. Duketon mine life is no longer a major concern. McPhillamys guidance is now more conservative.

“RRL is a relatively low-cost, long-life, diversified gold miner with a strong operating track record and upcoming potential catalysts in the McPhillamys decision and April-2022 R&R update. Yet, RRL now trades at a substantial discount.”