Ground Breakers: Twiggy target Regis looks to run past 500,000ozpa

ASX gold miner Regis Resources announces plans to fly beyond 500,000ozpa by FY25
Sector hit by expectations of 75 point rate rise from the US Fed this week
Perseus records another strong quarter at its gold mines in West Africa

Regis Resources (ASX:RRL) has spent much of the past two years as the poster child of investor antipathy to big gold stocks, having twice in a row been among the worst ASX 200 performers.

But there are plenty out there whose thesis is this long-term dividend paying, profit generating gold stock is now heavily undervalued.

Regis is up almost 21% since the start of the new financial year, having bottomed out at $1.30 on June 30.

Much of that gain came after mining multi-billionaire Andrew ‘Twiggy’ Forrest launched and abandoned a raid aiming to take a significant chunk of the gold miner.

And it has its sights set on a change in fortunes with the first year with the 30% share of the Tropicana gold mine once owned by IGO (ASX:IGO) now in the books.

Regis delivered 124,000oz at AISC of $1591/oz in the June quarter to take its FY22 production to a record 437,000oz at $1556/oz, within production guidance but above its cost guidance of $1425-1500/oz.

It won’t be alone in that this quarter, given the inflationary pressures seen across the industry. With a range of operational issues now sorted out it is looking for growth, targeting 450,000-500,000oz in each of the next two years before climbing above 500,000ozpa in FY25.

That is before the potential development of the long-delayed McPhillamys operation in New South Wales.

RBC’s Alex Barkley, who has an outperform rating and $2.70 price target on Regis, says the guidance was softer and more conservative than expected, but largely priced into the stock’s $1.2 billion valuation.

Regis Resources (ASX:RRL) share price today:

Internal growth

Regis boss Jim Beyer says the gold miner will be able to hit the target from internal sources, despite relatively little movement in resources and reserves in an update earlier this year.

“The pleasing thing about … the reserves in the resource update that we put out a few months ago, was the fact that Rosemont underground has moved into the phase of being able to replace depletion,” he said.

“We don’t expect to see any major doubling or tripling of that now. We just expect to see that on a rolling basis and I think Garden Well will enter that phase over the coming 12 months as well.

“Once you get underground, you get the right platforms and you can start to drill more material further down plunge with an accuracy and confidence to bring them into reserves.”

Perseus excels on costs

Gold miners were knocked down in general after fears of a 75 point rate rise from the US Fed sent commodity prices lower overnight.

In that context not too much can be read into the reaction to quarterlies today.

West African miner Perseus (ASX:PRU) has unloaded another strong set of results, pouring 120,409oz of gold from its Yaoure, Edikan and Sissingue mines at an average cost of US$1004/oz.

Its FY22 costs came in the bottom quartile of guidance at US$952/oz, among the best in the industry for a company not reporting enormous copper credits.

Perseus sold a total of 481,075oz in FY22 and has set guidance for the December half of 240,000-265,000oz at AISC of US$1000-1100/oz.