Regis Resources (ASX:RRL) share price drops on quarterly update

The gold miner outlines a tough period.

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The Regis Resources Ltd (ASX: RRL) share price is sliding today, currently trading 2.63% down at $2.22.

Regis shares are on the move as the gold mining and production company released its activities update for the quarter ended 30 September 2021.

Here are the key takeouts.

Regis Resources share price slips as gold production slides

Regis outlined several investment takeaways in its quarterly update, including:

  • Gold production across the quarter came in at 101,989 ounces, an 11% decrease from the previous quarter
  • All-in sustaining cost (AISC) of $1,521 per ounce, up 9.7% quarter on quarter
  • Gold sales for the quarter totalling $179 million at an average realised price of $2,178/oz
  • Operating cash flow of $94 million from its Duketon and Tropicana interests combined
  • Cash and gold bullion of $208 million, down from $235 million in the previous quarter after capital budgeting decisions
  • Maintains FY22 guidance of 460,000 to 515,000 ounces, on an AISC of $1,290 to $1,365 per ounce.

What happened this quarter for Regis Resources?

Regis left the quarter weathering the effects of the pandemic. Gold sales for the quarter were just shy of $180 million on an average realised price of $2,178 per ounce, adjusted for hedging.

Regis said it has absorbed the impacts of the pandemic and the government’s responses to curb the virus via lockdowns.

It reported feeling this impact at the staff level with high turnover as well as increasing competition for high-quality replacement candidates.

Aside from this, the company also wound back its gold production by around 11% for the quarter to almost 102,000 ounces.

This came in on an AISC of $1,521 per ounce, roughly 10% higher than the quarter prior.

Drilling beneath the main pit at the company’s “latest growth project”, the Garden Well South mine, revealed further strong mineralisation. This indicates the “potential for establishing a new underground resource and potentially an additional underground production area”.

One other headwind the company faced this quarter surrounds the permit process for the McPhillamys Gold project.

Progress to this point has been at a snail’s pace and is “largely outside of the company’s control”. Although, Regis does anticipate some progress to be made in the first half of FY22 on this front.

Regis also left the quarter with $208 million in cash and bullion – down 23% from last quarter – after a flurry of expenditures including a $77 million capital spend, $22 million in dividend payouts to shareholders, a $21 million income tax provision, $17 million for exploration at McPhillamys and $17 million for other expenses.

What’s next for Regis?

On the back of performance this quarter, Regis maintained its full-year FY22 gold production guidance range of 460,000 to 515,000 ounces.

It forecasts this range on an estimated AISC of $1,290 to $1,365 per ounce and growth capital of $155 million to $165 million.

Progress at the company’s Garden Well South underground mine also continues with the first ore expected in the December quarter and stoping to commence sometime in the three months from June to September FY22.

What did management say?

Speaking on the announcement, Regis Resources managing director Jim Beyer said:

The September quarter was a difficult one with the already planned lower production flagged when we provided guidance for FY22 accompanied with some challenges that were not expected.

Beyer went on to add:

It is clear there are risks of further COVID impacts in both supply chains and personnel availability. The mandating of vaccination shots is viewed by Regis as a critical element of the path out of this period of uncertainty and we are actively supporting and planning for this initiative. We note the mandatory nature of the vaccination requirements in Western Australia may result in further near-term labour availability risks.

The Regis Resources share price has struggled this year to date, having posted a loss of 38% since January 1, extending its losses over the last 12 months to 48%.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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