Monsters of Rock: Could a long awaited mine approval bring on a renaissance for this mid-tier gold miner?
Loved by a number of analysts and famed for an ability to turn difficult, low-grade gold deposits into winners, Regis Resources’ (ASX:RRL) has been a laggard for longer than its backers would care to admit.
Gold prices are up over 50% over the past five years in US dollar terms, as safe-haven buying amid a riskier economic outlook has seen investors flock to bullion.
In that same period Regis has struggled, seeing the value of its shares tumble by 54.5%, leaving the ASX 200 gold miner with a market cap of around $1.5b today.
Higher costs at its Duketon operations have seen dividends in some reporting periods canned, while investors seem to be yet to take fully to its $900 million acquisition in 2021 of IGO’s (ASX:IGO) 30% stake in the world class Tropicana gold mine, majority owned and operated by South African giant AngloGold Ashanti.
Adding some insult to injury, Capricorn Metals (ASX:CMM), led by former Regis chairman Mark Clark and the team that grew it into the mid-tier gold miner it is today, adopted the same playbook and is now worth more than its spiritual cousin despite boasting around a quarter of Regis’ production profile.
But Regis shares have rebounded 15% over the past month and lifted over 5% today on a major announcement that could see the gold producer begin its renaissance.
And that is the approval by the New South Wales Independent Planning Commission of the McPhillamys Gold Project, ending what has been a frustrating wait to permit the 2Moz gold deposit.
Four years after Regis kickstarted the approval process for the project 250km west of Sydney in Central Western New South Wales, it has finally received the green tick.
“We are very pleased with the IPC’s final determination and can now move forward with our production ambitions at the McPhillamys Project,” Regis managing director Jim Beyer said.
“The Project holds substantial potential for Blayney and its surrounding areas in Central Western NSW and we look forward to working with local communities, stakeholders and companies to mitigate the risks and concerns surrounding the project and establish this gold mine in a collaborative way.
“McPhillamys is one of Australia’s largest undeveloped open-pittable gold resources and underpins significant value potential for Regis.
“We anticipate a response on the Federal Section 10 application shortly and will now incorporate the approval conditions into the finalised feasibility study, complete the funding strategy for the Project and expect announcing further developments late in 2023.”
The deposit has been known about for decades and as a large, low-grade deposit bears similarities to both Regis’ Duketon operations in WA as well as the established Cadia and Northparkes gold and copper mines in regional New South Wales.
“The McPhillamys Gold Project was first discovered decades ago and it is only after years of geological research and investigation as well as extensive environmental and social impact assessment that this project has been approved,” Association of Mining and Exploration Companies CEO Warren Pearce said.
“This approval is an important milestone for NSW and the first new mine approved in 10 years.
“Mining projects such as the McPhillamys Gold Project are a great example of the rich natural mineral wealth within NSW and the determination that explorers and miners have to maximise the resource potential of NSW for significant public benefit.”
Regis is on track to produce 450-500,000oz in 2022-23, with all-in sustaining costs at the upper end of its $1525-1625/oz guidance range.
It was another broadly promising day for materials stocks, which are up over 1.4% today and 5.56% for the week.
On the flip side, Syrah Resources (ASX:SYR) found support after trimming losses at its Balama graphite mine in Mozambique.
“Improved operational performance” saw the prospective Tesla supplier report record annual graphite production of 163,000t and sales of 162,000t at Balama in 2022 at a weighted average price of US$661/t CIF.
Revenues lifted from US$29m to US$106.2m year on year in 2022, with net loss after income tax trimmed from US$56.9m to US$26.8m.
The company is close to the completion of a definitive feasibility study on expanding an active anode materials processing plant in Louisiana in the USA from an initial 11,250tpa under construction to 45,000tpa.
Tesla plans to increase its share of offtake from 8000tpa to 25,000tpa once the expansion is approved, with Ford-SK On and LG also signing MoUs to evaluate securing AAM supply from Syrah.
The project will be backed by a US$102 million loan from the US Department of Energy and a potential US$220m grant through the DOE Bipartisan Infrastructure Law Battery Materials Processing and Battery Manufacturing grant program.