Regis Resources: Guiding to strong FY22 with Tropicana contribution

About the author:

Mat Collings
Author name:
By Mat Collings
Job title:
Research Analyst
Date posted:
05 August 2021, 8:30 AM
Sectors Covered:
Mining

  • Regis Resources (ASX:RRL) outlines a strong FY22 plan, with midpoint guidance of 487koz of production at A$1,327/oz AISC.
  • Tropicana is expected to contribute 120-135koz, but is also a major source of capital spending as the Havana open pit cutback continues (est. A$72m).
  • A strong Q4 saw RRL hit FY21 guidance, with over performance from the Rosemont underground mine key.
  • Revising our forward production estimates on FY22 guidance, we retain our ADD recommendation at a revised target price (login to view). We continue to see RRL as a long-term value proposition as the company demonstrates the upside from Tropicana within its portfolio.

Event: Q4 results and FY22 guidance

Regis has released FY22 guidance, targeting 460-515koz of gold production at AISC of A$1,290-$1,365/oz. This compares to FY21 overall production of 373koz at a cost of A$1,373/oz.

Tropicana contributed two months production to Regis (17.3koz) but with a planned shutdown completed in the quarter, reported costs were outsized at A$2,121/oz.

Analysis

RRL sprinted to the finish in FY21, supported by record production from the new Rosemont underground mine. Production from the underground will moderate towards long-term average in FY22, though the Garden Well underground will begin to contribute to Duketon production late in the FY.

Tropicana results are difficult to attribute for the last quarter of FY21, with partial production offset through adjustments to purchase price. Guidance for FY22 of 120-135koz (attributable) sees the operation returning towards long-term expectations, with the Havana cutback and Boston Shaker underground ramp up both progressing in FY22 (meaning the reliance on stockpile ore has some way left to run still).

Forecast and valuation update

We have adjusted our FY22 forecasts, reducing production slightly on guidance. We expect AISC to begin reducing from FY23 as Tropicana returns to steady production and underground ore forms a greater portion of production at Duketon.

A breakdown of the impact from our previous assumptions is presented on page 4.

Investment view

We continue to see long-term value in RRL at the current share price. It will, however, take time to demonstrate the longer-term value at Tropicana where the company has paid a relatively full value for the current mine plan and Reserves. As such, we think RRL suits long-term investors.

We maintain an ADD recommendation at a revised target price (login to view).

A sensitivity table and explanation of our valuation methodology is presented on page 4.

Price Catalysts

  • Greater clarity on Tropicana results and impact over FY22.
  • Underground ramp up at Garden Well.
  • Progress on permitting for McPhillamys in NSW.

Risks

  • Permitting risk remains at McPhillamys, creating uncertainty in development timelines.
  • Macro-economic risks common to all gold miners of the USD gold price and USD/AUD exchange rate.

Find out more

Download full research note

You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.

If you would like access or more information, please contact your adviser or nearest Morgans office.

Request a call  Find local branch

Need access to our research?

You are also welcome to start a two-week trial of our online platform, which provides access to detailed market analysis and insights, provided by our award-winning research team

Create trial account 

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

  • Print this page
  • Copy Link