What Happened to the Regis Resources Share Price?
Shares of Regis Resources [ASX:RRL] got smashed by 7.31% on Monday, closing at $1.58. This was the lowest price since 7 October 2010. This follows Regis’ 25% share price decline last Friday.
Why did this happen to the RRL Share Price?
Regis Resources is a gold production and exploration company with projects in the Eastern Goldfields of Western Australia. Its main projects include Moolart Well, Garden Well, Erlistoun and Rosemont.
For a number of years, Regis has been one of the better managed and lowest cost gold producers on the ASX. In fact, the company paid out $74 million in dividends in December 2013. This pretty much left the company’s balance sheet exposed to no cash and significant debt.
Unfortunately for the company, shortly after, it announced that its largest projects — Garden Well and Rosemont — experienced major flooding in February. As a result, the company (having no cash on hand) was required to materially increase its debt facility to repair, modify and upgrade its assets.
As such, production has been significantly downgraded this year.
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Regis has been targeting production of over 400,000 tonnes of gold per year for 2015. Today, it announced that production should be between 305–355,000 tonnes of gold.
Its cash costs have also increased significantly. In 2013, they averaged roughly US$562 per gold ounce. Now the company is forecasting its cash costs should rise to between US$835–915 per ounce of gold.
What now for Regis Resources?
I think that this company has been extremely unlucky. It was once one of two gold stocks in the ASX100 — the other being Newcrest Mining [ASX:NCM].
Production should be materially lower this year. Furthermore, following plant and site modifications, all-in sustaining costs (total costs) will likely come in well above the US$1,000 level. This leaves little room for error if the gold price falls.
As such, investors are hitting the sell trigger. I can’t say that I’m surprised.
Key catalysts are the company returning to full production. The commencement of Rosemont Stage-2 is also important for the company. Patience is key.
Jason Stevenson+
Resources Analyst, Diggers and Drillers
