Regis Resources (ASX:RRL) has started the year strong as the company already produced 168,000 ounces of gold in the first half year of its financial year (which ends in June 2015). It’s great to see the Moolart Well mine had the lowest production cost as the cash cost for the 25,000 ounces produced on that project was just A$632/oz (which is approximately US$500/oz due to the weak Australian Dollar). This was substantially higher than the A$477/oz in the previous quarter, but we are still pleased with the performance as that mine still is the mine with the lowest cash cost of all three of Regis’ assets.
Furthermore, Regis has continued its exploration efforts at Moolart Well as the company wants to upgrade a large part of the inferred resource category to the measured and indicated categories so that the additional ounces could be incorporated in an official mine plan. The company had a net operating cash flow of A$38.9M and as only A$12.5M had to be spent on capital expenditures, Regis had a free cash flow of approximately A$26.4M in just the last quarter which is pretty good and indicates the company has turned a corner and seems to be leaving the problems which occurred in H1 2014 behind.
Regis Resources should once again be free cash flow positive this quarter as the AISC should be around A$1100/oz. This sounds high but as the Australian Dollar is quite weak, the spot price of gold is currently A$1600/oz. If one would assume 50% of the output has been hedged at A$1425/oz, the average selling price would be A$1500/oz, resulting in a margin of at least A$400/oz. Regis encountered some issues in 2014 but seems to be back on track now.
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Disclosure: The author holds no position in Regis Resources. Please see our disclaimer for current positions.
