Regis Resources (RRL): Garden Well Project Begins


Regis Resources (RRL) is an Australian gold production and exploration company. Its management team has a successful track record of developing mid-sized gold operations within Australia and Africa.

RRL’s flagship asset is the Duketon Gold Project in Kalgoorlie, in WA. The project comprises of 387 leases that cover over 2,030 sqkm of ground. These leases contain three main deposits in Moolart Well, Garden Well and Erliston.

FY12 results

RRL’s only producing mine is the Moolart Well. The group reported June quarterly gold production of 26,228 ounces, at a cash cost of $532 (pre-royalties).

Although cash costs rose slightly from the March quarter’s $519, RRL’s costs were still lower than its major peers due to the higher reserve grade mined and the low-cost nature of its operations.

RRL had guided for FY12 production to be between 95,000 ounces – 105,000 ounces, but beat its own guidance with 105,413 ounces produced. The company reported an FY12 net profit of $74.7 million, which was almost double FY11’s result and came on the back of a 58% jump in gold sales.

Projects with significant potential

The Moolart Well mine is projected to consistently produce around 100,000 ounces of gold a year for at least the next 4 years.

The company began producing from Garden Well earlier this month, and has forecast output from this mine to be between 220,000 240,000 ounces in 2013, at a cash cost of $400 – $450 an ounce.

RRL expects to commence development of the Rosemont Gold Deposit in the coming quarter. Taking into account Garden Well’s output and the development of Rosemont, RRL expects to produce over 400,000 ounces of per annum, significantly higher than FY12’s number.

Outlook

With FY12 now over, FY13 and FY14 earnings expectations will become more prominent in valuation models.

RRL is planning a dramatic increase in production over the coming years, which is likely to translate into a massive increase in earnings and cash flow from FY13.

With Garden Well and Rosemont about to ramp up output, the catalysts are in place for RRL to re-rate to a higher price earnings multiple, which is expected to translate into further share price gains.