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Monsters of Rock: Dragged through a hedge backwards? Not anymore, Regis says
Mining
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- 450,000ozpa gold miner Regis could make an extra $180m a year now it is hedge-free
- The mid-tier producer has been chipping away at massive hedging position at an average delivery price of A$1,592/oz since ~2019
- Ivan Vella is now making $1.4m a year as the big boss of nickel-lithium major IGO (ASX:IGO)
Wrapping the day’s most important news from Australia biggest miners.
Regis Resources (ASX:RRL) could make an extra $180m a year now it is happily hedge-free, with all gold sales now exposed to near record high spot gold prices.
‘Hedging’ involves a gold producer forward selling a portion of future gold production at a fixed price to lock in guaranteed revenue, rather than taking its chances with the spot price if it falls.
But hedges, now out of favour across the industry, have been a blight on the bottom line of RRL.
The mid-tier producer has been frantically working down a massive hedging position which easily surpassed 400,000oz in 2019 at an average delivery price of A$1,592 per ounce.
A$1600/oz didn’t look too bad four years ago. It does now.
The miner has now closed out the remaining 63,000oz hedge book balance — at a painfully low price of A$1,571/oz – for about $100m.
This will mean an extra $180m per year in pre-tax cash at current spot prices, managing director Jim Beyer says.
“Liberating Regis from its long-standing hedge book is a very significant milestone for the company,” he says.
“It allows Regis to fully realise the cash generating ability of our existing assets which have now entered a cash building phase after significant investment.
“Regis has a high-quality portfolio, with two 10-year+ life projects all in Australia and now fully exposed to spot gold prices.”
The third biggest gold miner on the ASX expects to produce 415,000oz – 455,000oz in FY24 at all in sustaining costs of between A$1,995 – A$2,315/oz.
RRL share price chart
Can Vella fill Bradford’s shoes at IGO?
Ivan Vella, who started his career making yacht masts, is now making $1.4m a year (plus incentives) as the big boss of nickel-lithium major IGO (ASX:IGO).
Vella was terminated prematurely by former employer Rio Tinto (ASX:RIO) in November for disclosing company secrets, after putting in his notice mid-year.
All a big mistake, Vella subsequently told IGO shareholders.
He has big steel caps to fill, following in the footsteps of industry icon Peter Bradford and more recently, Matt Dusci, who stepped up after the sudden death of Bradford last October.
Meanwhile Anthony Kiernan, chair at hard rock lithium major Pilbara Minerals (ASX:PLS), will retire in January after seven and a half years at the helm.
During his tenure PLS grew from $600m mine developer to $10.8bn industry stalwart.
Kiernan will be replaced by former Lynas Rare Earths (ASX:LYN) chair Kathleen Conlon.
