Markets Live, January 24, 2022

Gold miner Regis Resources is sold today after slashing its full year forecast after heavy rains in January damaged the partially constructed Rosemount main pit at its Duketon project in Western Australia.

The shares fell 18.6% when the market opened at $1.71 and last traded at $1.82. The stock price hit a six-year low of $1.66 in early December.

Regis said he now expects the Duketon project to produce up to 340,000 ounces of gold, rather than between 340,000 and 380,000 ounces. And the company’s total production will be between 420,000 and 475,000 ounces, up from a peak of 515,000 ounces. Tips for the Tropicana Mine remain unchanged.

However, the lower production forecast means the all-in sustaining cost (AISC) forecast for Duketon rises to between $1,540 and $1,610 per ounce, above the previous forecast of a high of $1,410. . This brings the company’s overall AISC up to $1,500 an ounce from a previous high of $1,365.

Jim Beyer, CEO of Regis Resources.

This morning Regis Resources told shareholders that heavy rain at the unfinished pit at Rosemount in January caused an 800 tonne rockslide, with no injuries. The senior geotechnical engineer concluded that “the pursuit was considered unsafe (and) the decision was made to permanently halt all activity in the main Rosemont pit”.

“At this stage, the impact on production for 2022-23 was unclear and so the decision was made to request a halt to trading.”

“The pit was expected to deliver approximately 18,500 ounces of high-grade ore at 2.6 grams in 2022-23, after which the main Rosemont pit would be completed. Assessments have concluded that this high-grade ore can virtually only be replaced in mill feed by low-grade stockpiles for the remainder of 2022-23.

RBC Capital Markets analyst Alex Barkley said he flagged the risk of Regis Resources lacking guidance in 2022-23 and already forecasting AISC failure.

“Although the downgrade is a blow to the 2022-23 earnings forecast, we still view Regis Resources as a competent mining operator,” he wrote in a note to clients.

“Duketon (RRL) and Tropicana have both achieved gold targets over the past five years, so we recommend overestimating the impact of isolated issues through 2022-23. With the possibility of a revision to As the outlook for 2022-23 declines, the focus can be on long-term equity value as well as upcoming catalysts in the soon-to-be-expected McPhillamys regulatory decision and April reserve update.

The McPhillamys mine is awaiting approval from the New South Wales government. It lies slightly west of Bathurst.

RBC Capital Markets has a price target of $2.50 and an “outperform” rating.

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