As the price of gold came down over the past few days, some of the ASX-listed gold producers are becoming relatively cheap.
Regis Resources (ASX:RRL) plans to produce approximately 325,000 ounces of gold at a cash cost of A$525/oz in the year ending in June. The company anticipates to produce in excess of 400,000 ounces next year at an average cash cost of approximately A$550/oz.
If we use a base case scenario with gold at A$1500/oz for next year, we expect Regis to generate operational cash flow in the region of A$380M and to table a net profit of A$240M. This means Regis is currently trading at a single-digit price/earnings ratio. It’s also important to know that the Regis-board will declare a dividend of A$0.20 in September, and plans to distribute 60% of the net profits to the shareholders over the next few years. Based on our assumption of a net profit of A$240M and a 60% payout ratio, we are expecting a dividend of A$0.30 for fiscal 2014. At the closing price of A$4.40, Regis Resources has an expected forward dividend yield of 4.5% this year and 6.8% next year.
Disclosure: The author owns a small position in Regis Resources Ltd. and will buy more shares in the near future. Please see our disclaimer for current positions.
