Regis Resources Ltd (ASX:RRL)
Regis is a company that specialises in gold production and exploration. Regis market cap is $2.6 billion, Regis current share price is at $5.53 (12 July 2019). At the end of 2016, the share price was trading at $2.38, effectively doubling over the last 2.5 years.
This company has two main operations in Australia. The first operation is in the Duketon region (Western Australia) with three operating mines (100 per cent owned by Regis). Annual production for FY19 is in the range of 340,000 – 370,000 ounces (oz) and costs (known as AISC) are in the range of $985 – $1055 per oz.
The second operation is in McPhillanmys – NSW (100 per cent owned by Regis). This project has identified a mineral resource of 2.3 million oz of gold and ore reserves of 2.0 million oz of gold. Regis is undertaking a definitive feasibility study to develop this project. This project could produce 292,000 oz of gold over a nine year mine life.
Investor should consider having some exposure to gold. This is because the gold price (in US dollar terms) generally increases when there are global economic and political concerns. The issues today include heightened concerns with global economic growth expected to slow over the next 12 months as well as international tensions around the trade dispute between the United States and China and the political dispute between the United States and Iran over Iran’s nuclear weapons capabilities.
One way to gain exposure to gold is buying gold stocks on the ASX. Regis one such company. The positive aspects of Regis include the following:
- First, Regis is a strong financial position with $187 million in cash and bullion, no debt and generating strong cash flow. Regis is currently trading at a P/E ratio of around the mid-teens and a dividend yield of around 3 per cent (dividends are fully franked).
- Second, Regis gold production outlook is positive. This growth could be underpinned by the development of Mcphillamys Gold Project. This project could produce 192,000 oz of gold per annum over a nine year period possibly commencing around 2021. In addition, Regis is also developing the Rosemont underground mine with the first ore expected to be mined in September 2019 quarter.
- Finally, Regis gold production costs of are at the low end of the industry’s average. This low cost is expected to continue in the years ahead as the Mcphillamys Gold Project is a low cost project.
The negatives aspects include:
- Expanding production capabilities requires significant capital investment and exploration is high risk.
- Mining companies rely on finding additional resources to replace dwindling resources due to mining. There is a risk that Regis might not find replacement resources.
Looking for some Income Stocks that you can “bank on”? The expert ASR Wealth Analysts have put together their top 3 ASX stocks for 2019, 2020 and beyond. These companies have the appropriate balance sheet for the particular market sector and are continuing to grow their Earnings Per Share (EPS). What this means for investors is a steady, reliable dividend yield and an attractive capital growth forecast, or what we call “Quality Yield”.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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