Earlier this week, Regis Resources Ltd (ASX: RRL) announced a game-changing merger with Vault Minerals Ltd (ASX: VAU).
If the proposal goes ahead, it is expected to create a gold giant with a pro forma market capitalisation of about $10.7 billion and combined anticipated gold production of over 700,000 ounces per year.
Does this make Regis Resources shares a buy? Let's see what Bell Potter is saying about the proposed merger.
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What is the broker saying?
Bell Potter is positive on the deal and believes it creates meaningful scale, production diversification, and greater relevance to global investors. It explains:
We view this deal as a positive for shareholders and as carrying strategic merit. With no cash component, we look to relative equity valuations and find, based on VA consensus, RRL and VAU trading on similar forward P/E and EV/EBITDA multiples. Forecast EBITDA margins for both are in the 50%-60% range. From a free cash flow perspective, RRL is stronger in both yield terms and absolute dollars, but as VAU completes a major mill expansion at Leonora it catches up over FY28-FY29. We see this as complementary: Leonora will be lifting to an expanded steady state in the next 2 years as RRL potentially increases underground investment and the Tropicana open-pit passes peak production.
In the short-term, as a 700kozpa producer with five operating mines, the combination creates meaningful scale and greater relevance to global investors. It offers genuine diversification of production and spreads the development risk of McPhillamys and Sugar Zone. A debt-free balance sheet with $1.9 billion cash is extremely strong and improves access to capital. In the long-term, we see a more powerful growth platform with potential to compete for genuine top-quality assets. The company will be unhedged, offering full gold price exposure.
Should you buy Regis Resources shares?
According to the note, Bell Potter has responded to the news by retaining its buy rating and $9.45 price target on the gold miner's shares.
Based on its current share price of $6.51, this implies potential upside of 45% for investors over the next 12 months.
It also expects 5% dividend yields in FY 2026 and FY 2027, which boosts the total potential return to 50%.
The broker concludes:
We make no changes to our forecasts with this update. RRL continues to offer strong free cash generation, dividends and unhedged, debt free gold exposure. Retain Buy.
