Maqro Research Team Coverage
Overall, RRL missed expectations on both earnings and dividend, although growing significantly from last year. This is largely due to a much higher average realised price of gold as RRL’s production numbers decreased by about 3% since FY19. RRL expects stronger production in FY21 (355,000 – 380,000 ounces).
Key Metrics:
| Duketon South Operations Gold Production | 259,858 ounces, a decrease of 5.46% |
| Duketon South Operation AISC | $1,218, which was an increase of 19.41% |
| Duketon North Operations Gold Production | 92,184 ounces, an increase of 4.09%% |
| Duketon North Operation AISC | $1,324, which was an increase of 25.5% |
FY21 Guidance:
- C1 cash cost including royalties: A$1,030-1,090 per ounce
- AISC: A$1,230-1,300 per ounce
- Growth capital: A$50-60 million
- Exploration: A$35 million
- McPhillamys: A$15 million (this is the minimum spend for FY21)
Regis Resources Ltd Conference Call Highlights
- Corporate expenses shouldn’t be expected to change too much in the coming year, while RRL hasn’t provided a D&A guidance – they expect it to increase, but won’t provide anything specific.
- RRL requires at least a gold price of A$2,100 an ounce to make their numbers, has stated that they won’t use today’s cashflow to fund tomorrow’s gold – or they won’t return anything to their investors.
- The grade of gold at the Ben Hur mine which they acquired is definitely attractive but they aren’t pushing to mine it just for the sake of it.
- The dividend reinvestment plan that RRL has announced is a way in which RRL says it can highlight the fact that it feels like its undervalued, and that it can reduce some of the brokerage costs to its current investors – not significantly, but everything does add up.
- A “significant” amount of it’s current gold production is being sold at the full current prices, though it is selling some gold into the lower hedge.
- RRL’s slow dividend growth over the past 4 years compared to the growth in their financial metrics is due to the prudent nature of the management team – and with the McPhillamys project expected to demand capex, RRL has decided to reduce growth in dividends rather than finding other ways to fund the project.
- RRL hasn’t yet come to any final decisions on capex requirements on further projects – those decisions will be ratified by the board first in any case. He said that the $15m figure was an old figure but could be upgraded to as much as $50-60m, depending on requirements for various projects.
