I understand what you're saying @Darling, and I think Regis are paying a fair price for 30% of Tropicana, if they end up with it - which is up to AngloGold Ashanti after all, however if the gold price falls a fair bit from here, then $903m might look expensive.  If the gold price rises a fair bit, then it will look like a good price in hindsight.  Right now I reckon it's a fair price, and it does not baffle me.  There are a number of reasons why Regis would buy 30% of Tropicana.

• Firstly, and quite possible most importantly - to RRL management - it moves them up from #5 to #4 in terms of the largest gold producers on the ASX, which means they are more relevant and may generate more investor interest.
• Tropicana has a good track record of replacing reserves, as do Regis themselves, and I don't think they're valuing the acquisition just on a $ per Reserve ounce basis.  Based on Tropicana's total JORC Resource, it's only $394/ounce.  I understand what you are saying - Resources do not all necessarily end up being converted to Reserves, but there are plenty of mines that keep finding more gold and end up with more Reserves at the end than the Resource they started with, or have at various points along the way.  
• "Multiple near mine growth opportunities with attractive regional targets for longer term upside" - that's straight from presentation slide #8.  Regis clearly see upside there in gold that hasn't been found yet.  On slide #9 they say about Tropicana:
  • All deposits are open at depth providing a clear pathway to extend mine life, with other satellite opportunities identified
  • Large tenement package covering ~2,600 square km immediately surrounding Tropicana that is relatively underexplored
• In summary, from the final point on slide #8:  RRL view this as a "Portfolio enhancing acquisition for Regis, increasing production and resources and reserves with attractive growth opportunities."  Even if they pay a breakeven price for the gold they KNOW is there, everything else is upside.  And it makes them bigger, which seems to be important to these guys these days.

That said, I am concerned that Regis are using FY20 actual AISC for Tropicana, for instance on slide #13 where they are providing pro-forma details to show that had they owned 30% of Tropicana in FY20, Regis' AISC would have been 2% lower at A$1,225/oz.  It is important for people to realise that Tropicana's AISC (all-in sustaining cost) this year (FY21) is going to be a LOT higher than in FY20, mostly due to the transition to underground mining and the associated higher costs.  On slide #8 they say:  Tropicana is a top 5 Australian producing gold mine with gold production of 463koz at an AISC A$1,171/oz in FY20, and guidance of 380K0z - 430Koz (100% basis) at an AISC between A$1,730 – 1,860/oz in FY21.  In the footnote on that slide they add: "This guidance has not been prepared by Regis and after completion of the Transaction, Regis will include its own Tropicana guidance in due course."  Suggests to me that they think that AISC is a little on the high side, and it might be.  Better to underpromise and overdeliver, but one thing we DO know, Tropicana's FY21 AISC will absolutely be higher than it was in FY20.

Regarding the "continual change of focus", I think it's just a case of walking and chewing gum at the same time.  They can do more than one thing at a time - as shown on Slide #14 of their presentation, and they can have various avenues for future growth at various stages of development and/or execution, and some will need greater focus at various times than others will, and that will change.  They have not given up on McPhillamys, and I'm not sure that it's such an unfriendly jurisdiction.  It's less than 40km from Newcrest's flagship Cadia/Ridgeway gold mine, being NCM's (Australia's largest gold miner's) largest and most profitable mine by a country mile.  There is some community opposition, as there tends to be for many mining developments, but we'll know this year whether McPhillamys is going ahead or not, but I don't think Regis should be hanging their hat on just one growth project anyway.

Regis Resources are not my favourite gold miner.  That would be Northern Star Resources (NST), although I'm not particularly happy about Bill leaving NST.  I liked SBM a lot when Bob Vassie was the boss there, but the new guy (who is ex-NCM) seems to be doing OK so far since Bob left.  Regis is just the quiet achiever of the Australian gold space.  They never shoot the lights out.  They have however remained highly profitable - in terms of their ROE - for many years, and Duketon doesn't have high grades so it's all been about cost control and working smart.  I thought the "1 in 100 years" flooding event a few years back might have finished them off, but they came back from that, with some help from MACA (MLD) at the time.  The only thing I do not like about Regis is their hedgebook.  They tend to be way too conservative, settling for locking in profitability at the expense of maintaining exposure to a high gold price when it soars.  However, it is this very conservatism that gives me some encouragement that this deal for 30% of Tropicana is not a dud.  I personally think the chances of Regis becoming unprofitable - are extremely remote.  They will continue to quietly achieve.  And pay good fully franked dividends.

As for the financing of McPhillamys, if they get the approvals through, they'll obviously do another raising, and I'm sure they'll raise whatever they need to raise.  It's certainly something to be aware of, in terms of a negative future share price catalyst, but if they get the approvals through their share price will rise on that news anyway, so swings and roundabouts.  I do not think Tropicana is supposed to pay for McPhillamys, and it won't.  Tropicana just gets them up the food chain one more position and gives them more exploration upside potential.  It could also be viewed as a strategic acquisition if AGG ever decide to sell their 70%.  Tropicana is after all in the top five of Australia’s largest and most successful gold mines.

So, while you raise some good point @Darling, I remain alert but not alarmed.

18-Apr-2021:  Just thought I'd add to, or clarify, a couple of statements I've made in this thread.  I have assumed that if and when McPhillamys gets approved, Regis would do another raising.  In their conference call, during the Q&A section at the end, Jim Beyer (their CEO & MD) said that they didn't expect to need to do another CR for McPhillamys if the Tropicana deal goes through because the extra cashflow from Tropicana when added to the Duketon cashflow and their cash on hand at the time would be sufficient to build McPhillamys without another CR.  We shall see.  If they did need to raise more money, it wouldn't be as big as this latest CR - in my opinion, and there is clearly some doubt in the market's mind about McPhillamys getting approved, so I believe that McPhillamys getting approved is going to cause a positive re-rating of RRL by the market when it happens, and based on the site's proximity to NCM's flagship high-grade Cadia/Ridgeway mines, I do think it will get approved. 

McPhillamys is a BIG deal, because it's one of Australia’s largest undeveloped open pittable gold resources with a Mineral Resource of 2.29 Moz gold, An Ore Reserve of 2.02 Moz Au (gold), and should produce up to ~200koz Au per year once fully up and running.  I am more concerned with the satellite project, Discovery Ridge (which has a 390koz Au Resource and is located at the southern border of the McPhillamys lease) because of community opposition and concerns, mostly around damage to the natural springs that form or feed into the head waters of the Belubula River which isn't much more than a trickle up where the McPhillamys tailings dam is going to be built, but has become a small river by the time it reaches Blayney, in years with a decent rainfall. 

However McPhillamys can get approved with or without Discovery Ridge, which could either be deferred, scrapped, or modified if needed.  Regis have made it clear they do not intend to use that spring water and will take all steps they can to ensure it continues to feed into the Belubula River.

If this was a new thermal coal mine proposal I would be worried, but as a new gold mine in a gold mining district, I think McPhillamys will get approved, and within the next few months most likely, certainly this year we will know one way or the other.

Another thing I should mention is that I have stated that if AngloGold exercise their pre-emptive right and block Regis by buying the remaining 30% of Tropicana themselves (to then own 100%) - which they have 60 days to do from the date of the offer announcement (last week), then I believed that Regis would return the CR funds, and in the case of shareholder funds from the EO that would be via a capital return.  In the conference call Q&A it was made clear that they would actually consider a range of options for the use of those funds, with the capital return being only one of those options, so the capital return is by no means guaranteed.  If you want to listen to the conference call, @doktorspleen has provided a link to the audio recording of that conference call in his/her post which should be around 11 or 12 posts below this one in this forum thread, until more replies get added.  The break-fee that IGO would pay Regis if that happened would now be $40m, because the institutional component of the CR has already completed.

Also, I do not like Jim Beyer constantly referring to this deal to buy 30% of Tropicana as being a truly "Transformational" deal or transaction for Regis.  It really isn't.  It does not transform them into anything except a bigger gold producer with more Reserves, more Resources, More Production, and a larger market cap.  There are benefits in this for Regis certainly, and they'll be a better company once the deal goes through, sure, but I think "Transformational" is just a little OTT.

I am still a happy holder of Regis shares, and still planning to participate in the EO, unless I can do an RRL top-up even cheaper on-market.  They did trade below the $2.70 offer price when they resumed trading during the week, but not for long, and not much below $2.70 either, and I didn't pull the trigger at that point because I wanted to see if they would go lower - they didn't - they're back over $2.70 now, at $2.74.

I hold Regis, and I'm not unhappy with them buying the 30% of Tropicana that IGO owned, however it is a passive stake in a gold mine operated by AngloGold Ashanti, a South African based company (also listed in London I believe) who own the other 70%.  I understand IGO selling their Tropicana stake now that they are solely focused on battery metals, first with Nickel, Copper and Cobalt (Nova mine) and now Lithium also, and that Tropicana asset wasn't a core asset, so it makes sense for them to sell it.  I need to do some more work to arrive at a decision around price, as in whether RRL have overpaid, got a bargain, or paid a fair price - at this stage I suspect it's a fair price.  The main game for RRL is still the Duketon assets, and near mine exploration success there where they have so much infrastructure already in place and producing.  Their share price will likely be driven by progress or lack of progress with their McPhillamys Gold Project in central-west NSW, because that's their main growth project at this point.  I'll comment more on the Tropicana acquisition when I've done some more reading and research.

Interesting side note (for me anyway) is that Macmahon are the mining contractors at Tropicana, and I also hold Macmahon (MAH) shares.  The two best gold mining contractors (for contract mining) listed on the ASX are MAH and MLD (MACA).  MACA do all of the OP mining at Duketon for Regis.  MAH have a "life-of-mine" contract at Tropicana.  MLD have term contracts at Duketon for RRL which keep getting renewed.

Hi @doktorspleen, I'd say you're on the money with those assumptions, or at least well inside the ballpark.  There's also the fact that if this goes through (and the only thing that could stop it is AGG deciding to exercise their pre-emptive rights and buy the remaining 30% themselves to then own 100%) is that Regis will own 30% and have pre-emptive rights to buy AGG's 70% should they ever decide to exit Australia - as some other large global gold miners have, such as Barrick Gold.  There's also the small fact that if this current 30% acquisition goes ahead, Regis will leapfrog SBM and become Australia's 4th largest gold producer (behind NCM, NST & EVN), which will see them garner further interest, and they have McPhillamys to come.  If this does NOT go ahead, Regis have said they will return the money raised, and they will be paid a break fee by IGO of A$25 million if Anglogold exercises its pre-emptive rights prior to the settlement of RRL's placement and institutional entitlement offer; or A$40 million if Anglogold exercises its pre-emptive rights after the settlement of the placement and institutional entitlement offer.  So in that respect it's likely a win-win for both Regis and their shareholders.  Over recent years Regis have paid either the highest or the second highest dividend yield of any of our top 10 gold producers (most years RRL have been the highest yielding), paying out 16c fully franked in divs in FY17, FY18, FY19 & FY20.  In FY21 it will be 12c fully franked.  Even at 12c (and that would likely rise should the Tropicana deal go through), that's a yield of 4.44% plus franking credits.  At 16c/year it is 5.9% plus franking based on the $2.70 cap raising price.  That's a high yield for a gold miner.  One of the reasons they haven't grown as fast as some of their peers is their conservative management who are happy to return excess capital to shareholders until they see a compelling opportunity, which they do now clearly.  They don't make very many acquisitions, at all.  As a Regis shareholder, I have enjoyed the income from the investment (something that many gold miners do not provide) and I have been able to top up the position when they are sold down, and trim the position when they spike up, as they did in 2019 (RRL closed at $6.38/share on 15-Jul-2019) and again last year - $5.78 on 03-Aug-2020.  I will be participating in this 1 for 3.08 entitlement offer as part of their CR - priced at $2.70/share, unless they drop below that and I can buy more on-market at even lower prices (then I would do that instead obviously).  Of the top 10 gold producers listed on the ASX, I currently hold NST, EVN, RRL, SBM, RMS & GOR, so I hold 6 of the 10, so I guess take my comments with a grain of salt or three because I am a goldbug so I have a positive bias towards the sector.

Which balance sheet is that Doktorspleen?  It wasn't listed like that in the latest RRL annual report.  They have listed inventory separate to cash and cash equivalents and there's no mention of short-term investments on their balance sheet.  Was it in the acquisition presentation?  I can't see it.  Or a different company?

Yes DS, I reckon AGG could very easily stump up the cash to buy the remaining 30%, however at that price they probably won't.  I'm guessing they'll retain the same rights with RRL as owners of the 30% instead of IGO, so if RRL ever want to sell, AGG could then match that pice and buy then.  It now looks to me like there is a premium in that $903m price that RRL are paying, and I do not think AngloGold would be inclined to pay that at this point as they don't need to.  If they do however, it will show that they also view the upside potential of Tropicana as being worth more than many of the analysts out there who are suggesting that $903m is on the high side.  To be clear, I think that if Regis' assumptions about the upside potential of Tropicana are correct, then they are paying a good to fair price, however based on just the gold Reserves that Tropicana have now, without any allowances for future upside, they are paying a premium I think.

I'd say you are well on your way to understanding most of the issues that feed into a sensible valuation of a mining company but each company is different.  In the case of NST they have multiple mines here in Australia plus one in Alaska.  You can't just value them on their Reserves or Resources, or Production, or AISC, because each mine has its own challenges and advantages.  Most people find that Reserves, Resources, and AISC (costs) are the main things to look at, but it is never apples vs apples.

As well as the points you have listed, I would add:

• Management quality and track record, including reserves replacement, and capital management, plus what their M&A history has been like in terms of adding shareholder value or wasting money.  That is never captured in their costs (AISC), but is very important.
• Overburden - you have touched on this, but how much dirt/rock do they have to move to get to the good stuff, or in the case of underground mines, how far down is the gold?
• The types of ore and how much it costs to process efficiently, which also includes their recovery percentage.  No process recovers 100% of the gold in the ore, but the closer the number is to 100%, the better.  You don't want to let gold go through into the tailings.  Processing plants are a lot more efficient these days and people are able to make money sometimes from just reprocessing old tailings from earlier periods to get to the gold that was missed the first time.  In terms of ore types, to give one example, SBM has their Simberi gold mine in PNG on a neighbouring island to NCM's Lihir mine and they are currently in the process of converting the plant so that they can process the sulphide ore that they have sitting in their pits below the oxide ore that they have been processing to date.  The chemistry involved is complex - see here:  https://www.sciencedirect.com/topics/chemistry/gold-ore ...and requires different processes depending on the chemistry required to efficiently extract the gold from the ore.  Some mines fail, or come very close to failing (like Gascoyne Resources - GCY) because they don't understand their deposits well enough and as they mine their ore changes and they find that their processing plant just won't process the ore and extract the gold efficiently.  Costs then go up while production goes down and capital raisings follow.  Dacian (DCN) had similar issues with much lower recoveries than expected in their early years and a number of capital raisings.  This is far more of an issue with one-mine companies who are just starting out on the journey and lack experience.  It is much less of a problem with the larger companies with multiple mines who have the money and time to do proper grade control drilling and take samples as they go so there are less surprises down the track.

You mentioned hedgebooks and that is something that is easily overlooked.  A company with a lot of hedging is safer, in that you know what they are going to be selling their gold for, or part of it if they are partially hedged - which is usually the case - but you lose that leverage to a rising gold price.  So they remain profitable, but not as profitable as they might have been had they been more leveraged to the gold price in a high gold price environment.  The smart ones do their hedging when the gold price is high, not when it is low.  If done right, hedging can work really well for a gold company, but usually that is when the gold price falls and they've locked in higher prices via their hedgebook.  Even the big companies get it wrong.  Australia's biggest gold miner, Newcrest Mining (NCM) have what I call the good (Cadia/Ridgeway), the bad (Lihir) and the ugly (Telfer) in terms of established producing mines.  Those are their three main assets, and Telfer is a horrible mine, and horrible place to work.  Apart from being remote, and old, and ugly, and prone to breakdowns due to lack of preventative maintenance and the age of the plant, Telfer has the highest AISC of the three, and Newcrest hedged the majority of their future Telfer gold production a few years back when the gold price was a lot lower and their costs were lower as well.  At the time it looked OK, as they thought they were guaranteeing Telfer's profitability.  However, last year and the year before they found themselves in a situation where they were basically having to sell Telfer gold for roughly what it was costing them to keep the mine open, because their costs had risen, but they had already agreed to sell their gold at prices that were now well below the prevailing spot gold price.  I believe those hedges are either now finished or close to being used up, so Telfer might be able to make some money again, but it was certainly an issue for the mining contractors there, Macmahon (MAH, who I hold) who were losing money on that contract.  As it was a "life of mine" contract they told NCM last year that they needed better rates (due to the scope of the contract changing over the years) or they would walk away.  That was what the previous mining contractors had done - just walked away - because they could not make money mining gold at Telfer for the rates Newcrest were paying them.  NCM caved in and agreed to renegotiate the mining contract and now MAH might actually make some money at Telfer.  At least they've stopped losing money there.  The problem for NCM was that the mining contract is one of the biggest cost inputs into their AISC and their AISC was already borderline unprofitable at Telfer because of their hedgebook at the time, and if Telfer became loss making it would put pressure on NCM management to close the mine.  They didn't want to close Telfer because they had some plans for near-mine tenement acquisitions and exploration opportunities which should be progressed over the next few years, so basically they want to find more gold bearing ore to put through the plant and lower their costs.  A processing plant as big as Telfer cost hundreds of millions to build and you want to use it to generate income for as long as you possibly can, economically.  But their hedgebook got in the way of that over the last couple of years.

So hedgebooks can be sensible, particularly if you are small and carry debt, and you want to guarantee your own survival until you are debt-free, or if you think the gold price is going lower and you want to lock in higher prices for future production, but they can certainly work against you if the gold price goes on a tear.

I've got to go do something now.  I'll carry on with this conversation later.