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Why Regis Resources Limited (ASX:RRL) shares were smashed today

One of the worst performers on the Australian share market on Tuesday was the Regis Resources Limited (ASX: RRL) share price.

The gold miner’s share price finished the day down almost 11% to $4.46.

This was an improvement from earlier in the day when the miner’s shares were down as much as 13% at $4.35.

Why did Regis Resources’ shares plunge lower?

This morning the gold miner released its fourth quarter report and guidance for FY 2019.

In the final quarter Regis Resources produced 92,008 ounces of gold, up 8% on the third quarter. This led to record quarterly operating cashflow of $85.3 million.

It also took its FY 2018 production to a total of 361,373 ounces, meaning the company hit the top end of its guidance range.

While this was positive and would have arguably gone some way to justifying its 28% share price gain over the last 12 months, investors appear to have a few concerns over its rising costs and have hit the sell button today.

Due to higher waste volumes, primarily for pre-strips on new pits, the company’s all-in sustaining cost (AISC) rose strongly in the final quarter. Regis Resources reported an AISC of $982 an ounce during the quarter, almost 9% higher than the average AISC of $901 an ounce during the last 12 months.

Unfortunately, this isn’t a one-off. Management expects its costs to rise in FY 2019 and has provided AISC guidance in the range of $985 and $1,055 an ounce.

In addition to this disappointment, the company’s production guidance has been a little on the soft side. It expects production in the range of 340,000 to 370,000 ounces, compared to 361,373 ounces this year.

Should you buy the dip?

With costs rising, production potentially falling, and the outlook for the gold price mixed, I can understand why investors would be heading for the exits today. While this decline has pulled its shares down notably lower, I wouldn’t class them as being overly cheap given its guidance.

If I were bullish on the gold price I would sooner invest in Northern Star Resources Ltd (ASX: NST) and OceanaGold Corp (ASX: OGC) ahead of Regis Resources.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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