THE gold continues to glitter for WA-based miner Regis Resources.
Regis Resources’ shares climbed to a historic high of $5.76 in February, after the Duketon gold project owner announced a half-year profit of $80 million.
While the price hasn’t sustained that level, it’s hovered between the $5 and $5.50 mark ever since, allowing the company to return more than $40m to shareholders in the form of an 8¢ a share interim dividend.
The gold miner generated $126.5m in operating cash flows between July 1 and December 31 last year on sales of 186,726 ounces of gold and revenues of $317.2m, with EDITDA of $146.4 million at a healthy margin of 46 per cent.
Figures from its latest corporate update reveal a number of impressive investment highlights, including record gold production of 361,373 ounces at A$901/oz (AISC), while enjoying reserves of A$207m in cash and bullion, with no debt.
In total, 114,966oz of gold sold at an average price of A$1718/oz.
Managing director Jim Beyer said strong operational cash flows of A$300.8m in the 2018 financial year were driving consistent dividend payouts, as Regis aims to develop its first underground mine beneath the Rosemont open pit.
Dividend payments lifted by 7 per cent to 16 cents per share in that period, putting cumulative dividend payments at A$326m since 2013.
Ore reserves increased by 86pc to 4.06moz, while earnings per share were up 25pc to 34.6c per share.
Mr Beyer said that Duketon had delivered consistently low-cost production over a long period, which contributed to robust net profit margins of A$174m, up 26pc.
“The cash flow is put to good use investing in future growth for the company, while returning excess funds to shareholders in the form of dividends,” he said.
The miner’s Laverton-based flagship operation entered production in 2010 following the construction of the Moolart Well gold mine.
In 2012, Garden Well was added to the mix, which has its own standalone mill, and a year later, the Rosemont hybrid gold project was commissioned, which includes a crushing and milling circuit, with ore slurry-pumped to Garden Well’s processing facility.
In the 2018 financial year, operational excellence continued across the three mines. At Moolart Well, gold production was up 9pc in the June quarter as a result of an increase in throughput to a record annualised rate of 3.5mt per annum, 11pc up from the prior quarter.
Regis expects to produce 340,000-370,000oz of gold at Duketon in fiscal year 2019 at all-in sustaining costs of $985-$1055/oz.
It’s an emphatic comeback from nine months ago when shares took a 12 per cent hit, after expenditure estimates were raised as a result of rising diesel costs and satellite pit development, forcing Mr Beyer’s predecessor Mark Clark to defend the unexpected slump.
“Our costs are forecast to be marginally higher at Duketon this year because we’re cracking the top of some high-grade starter deposits,” Mr Clark had said.
“For the past two years we’ve given cost guidance and our actual costs have been below that guidance.”
Rosy for Rosemont
One of the biggest growth drivers in the near-term will be an expansion at the Rosemont operation.
In August last year, Regis gave the green light for construction to begin on an underground mine, directly below the existing open pit.
“We believe that the approved Rosemont underground operation is a robust business in its own right; but just as importantly will see the infrastructure in place to grow that mine through exploration from an established underground footprint,” Mr Clark had said.
“This growth opportunity will be targeted both laterally between the two mining zones and at depth and along strike.
“There is also a very strong opportunity to replicate this development path at Garden Well in the near term and then at other Duketon satellite pits in due course.”
The combined open pit and underground mine at Rosemont is scheduled to deliver 10.3 million tonnes of ore at 1.72 grams per tonne for 570,000oz over a current five-year mine life.
The underground component has a Mineral Resource Estimate (MRE) of 1.4mt at 5.1g/t gold for 230,000oz of gold at a 2.0g/t gold cut-off grade.
Once the underground mine was at full mining capacity, the combined operation would produce at a run rate of between 120,000 and 130,000ozpa: an estimated 45,000ozpa uplift on production.
Regis expects full production levels at Rosemont by late 2019.
Open pit mining services at Rosemont will be carried out by MACA, which recently received a contract extension for work at the Duketon South operations, which also includes Garden Well, Erlistoun, Baneygo, Toohey’s Well and potentially other satellite projects in the region.
According to MACA, the project – which includes drilling and blasting, and loading and hauling – utilises technology to optimise the mine planning across the operations, ensuring the most efficient use of both machinery and human resources.
The contractor expects the new agreement will generate about $590 million in revenue over the initial five-year term.
Organic Growth at NSW
Outside of WA, plans are proceeding well to progress the McPhillamys and Discovery Ridge projects in Central NSW, which Regis believes constitute Australia’s largest undeveloped open pittable gold resources.
McPhillamys boasts a gold reserve of 2.03moz, and a mineral resource of 2.31moz.
A Pre-Feasibility Study was completed in 2017, which determined a planned 7mtpa mining and processing operation that would produce an average of 192,000ozpa over a 10-year life.
A Preliminary Environmental Assessment (PEA) has already been submitted to the NSW Department of Planning and Environment, the initial stage in the development application phase, and the catalyst for the Government to provide the Secretary’s Environmental Assessment Requirements (SEARS) for the project.
SEARS would then allow for the Environmental Impact Statement (EIS) to be appropriately focused to enable regulatory assessment of the project.
The completion of the EIS, planned to be lodged in the final quarter of 2019, will allow for final elements of a Definitive Feasibility Study (DFS) to be signed off.
The document would include updated operating parameters, estimated capital and operating costs and a development timetable.
In addition, Regis was examining Discovery Ridge, 32km south west of McPhillamys, as a potential satellite mine.
The Discovery Ridge deposit was acquired in 2017 as part of the Blayney Gold purchase.
Regis is considers the mine as a solid growth option, with a resource of just over 500,000oz.
Recent highlights include strikes of 129m at 2g/t and 94m at 2.6g/t/
Infill drilling results have confirmed historical gold intersections, while broad lower grade intercepts containing higher grade cores have demonstrated future underground potential.
Prospecting Prospects
Mr Beyer believes the best is yet to come for Regis, with the company only literally having “just scratched the service”.
“A significant area of leases are yet to be explored,” he said.
“There’s been virtually no deep exploration undertaken beyond Rosemont and Garden Well, with only 5pc of drill holes existing deeper than 200m.
“Shallow exploration drilling alone has discovered about 7.7m oz since 2006.”
Mr Beyer said testing of depth extensions beneath known mineralisation has now started, and the company looked forward to the results.
Part of Regis’ success was also based on the company’s culture toward staff and the environment.
“We continue to drive a performance-based culture, underpinned by our values,” Mr Beyer said.
“We create a workplace where all our people can perform to their full potential every day, with a targeted approach to inclusion and diversity.
“Our investment in developing our people is delivering results as we strive to deliver exceptional business performance and sustainable outcomes.”
Regis also creates value through social leadership, through demonstrated commitment to effective environmental management of activities.
“There’s a board focus on environmental, social and safety governance, aiming for consistent sustainability performance and engaging the support of local communities,” Mr Beyer said.
