I think it's more the guidance downgrade Stuey - higher costs, lower production. The bulls - like me - will say this is temporary, not structural, however Regis have been in a bad news cycle of late, and this won't do anything towards turning the frowns upside down. For many people, they will give them a couple of chances to come good, but with every extra piece of bad news more punters will sell out and move on. They just want to be in something that's rising, not falling. That leaves just the true believers it seems, like me. I know that Regis are a quality outfit, however they've had a sting of bad luck and delays with the McPhillamys approvals, so the market's scratching for things to get excited about with RRL and not finding much. They looked cheap last year, and they've just got cheaper and cheaper. I'm still on board however. Not adding any more, but not selling either.

Side note: I note that many of the companies that were being sold down the other day when gold stocks and iron ore miners were rising are now among the best performers, and many of those gold and mining stocks are in the red - like they've swapped places.

Swings and roundabouts. Or is it snakes and ladders?

Good points there @ShrangriLa, can't argue with any of it. Agreed that Regis could be slow to turn, but I'm onboard and betting (with real money) that they are going to be worth more in 2 years than they are now. I'm not as confident in a shorter term (3 months or 6 months for instance) recovery, but medium to longer term (2 to 3 years) I reckon they'll prove to be a good investment at current prices. There are many cheap gold producers currently, but the cheapest ones are the ones with the issues that are causing people to dump them.

Northern Star has high costs and no Bill Beament any more;

St Barbara have higher costs than previous years, no production at all currently at Simberi due to the ruptured DSTP (deep sea tailings placement) pipeline having to be repaired or replaced, a slow approvals process in Nova Scotia for the next couple of Atlantic Gold (Moose River) gold mines, and even some issues at their lowest cost mine - Touquoy - in the most recent quarter. The only good news that SBM have currently is that Gwalia is on the "up" again - higher production and costs starting to come down again.

Regis have all of the issues that you have outlined ShangriLa, plus the prevailing view is that they overpaid for their 30% of Tropicana. I see these issues as temporary, not structural, although the overpaying for Tropicana won't be temporary if they don't find more gold there as they expect they will. Or if the gold price falls and stays low instead of continuing to rise over time as it has so far. Also, their hedging is going to take a while to unwind clearly. They seem to be delivering gold into those hedges at the minimum rate that they can (or close to it) to take advantage of the much higher prices on offer for the majority of their production. If the gold price falls, that strategy will work OK for them, however if the gold price rises steadily from here they may look back and wish they'd unloaded more gold into those hedges when they had the chance.

Regis might not have the very best mines (except for Tropicana which IS one of Australia's best gold mines), they certainly have NOT got a great hedge-book, but I personally think Tropicana was a good move for them and will help carry them through should McPhillamys take longer than expected to get approved, built and commissioned - assuming that it does, which is certainly an important part of my investment thesis for RRL, if McPhillamys is a flat out "No!" then I'm going to have to reassess. However, I'd be surprised if McPhillamys does NOT go ahead. I think it will, but I do NOT know how long it will all take, and the gold from Tropicana is going to provide much needed cashflow for Regis in the meantime. In fact, during the Q&A on the conference call regarding the 30%-of-Tropicana acquisition, Jim Beyer said that he believed Tropicana would provide all the cash they need to fund the build of McPhillamys WITHOUT another capital raise. The market's reaction at the time and since said to me that the market does not believe Jim on that one. Again, time will tell.

McPhillamys certainly has the potential to become one of Australia's best gold mines.

I think SBM and RRL both look UGLY right now, but as long as that is temporary, as I think it is, and as long as they come good in a year or three, I'm happy to hold them down here, and accumulate more. In fact, I did buy more Regis today in my SMSF on the back of that understandably negative reaction by the market to the quarterly report.

Of course I could be wrong. They might be a dog, with fleas. I don't think so, but it's possible. Time will tell.

If gold goes for a run, I'm betting that the gold producers who have been smashed the hardest are going to bounce back more than the others. Of course that will depend on how ugly they look at that point in time too.

Fair points Gprp. Agreed that on face value the Tropicana deal looked to favour IGO more than RRL, and while AGG (AngloGold Ashanti) had the right to match RRL's price and buy the remaining 30% of Tropicana that they didn't already own, they were happy to let RRL buy that 30% at that price at that time. It should be noted that AGG still have the same rights with RRL that they previously had with IGO, so if Regis ever want to offload that 30% of Tropicana, AGG will again have the right to buy it themselves at whatever price RRL can get a third party to agree to pay. My thoughts are that for Tropicana to pay off for Regis, they either need a higher gold price or they need to find more gold at Tropicana. I personally think they'll get both. Jim Beyer said at the time of the acquisition that they had done their DD and they believed based on the geology and the results to date that there was more gold there to be found. I believe that it was on that basis that they made the numbers stack up from their own internal perspective.

The scenario they were in was that (a) the McPhillamys approvals process was taking longer than they had anticipated, and assuming it does get approved (and I would give that a 90% probability), it will take a couple of years of construction, commissioning and optimisation before we'll see that mine producing gold at the rates they are hoping to achieve there, and (b) it's fair to say that Duketon is a declining asset. There are no guarantees that they're going to find more gold in and around Duketon to replace the gold that they are digging up, processing and selling. In that light I can understand them seeing the chance to buy a passive stake in one of Australia's best quality gold mines as attractive, and yes, they did pay a premium price for it - I agree. However, it gives them predictable cashflow and also keeps them relevant from an "ounces produced p.a." perspective. So I can understand WHY they did it.

That said, I still feel that Regis is worth more than their current price without McPhillamys, and if and when McPhillamys gets all of their approvals in place and a positive FID, we're going to see a material positive re-rating of Regis by the market. However, I do note that McPhillamys MIGHT NOT get approved. That is possible. Or it could take far longer than even I expect. And there isn't much for the market to get excited about with Regis in the absence of positive news concerning McPhillamys except for a higher gold price. As in, higher than where it is now.

What I AM fairly confident about is that there are two types of gold companies who are going to benefit most from a substantially higher gold price, all other things being equal. The first is Australia's largest producers, NCM and NST, and EVN to a lesser extent (NCM & NST are both global top-10 gold producers, EVN is not, although they are Australia's third largest). The second group that should benefit most are those who have been sold down the most but are still solid producers with reasonably low costs and a balance sheet with low or no net debt. Regis and St Barbara both fall into that second category.

In terms of risk, I think that both Regis (RRL) and St Barbara (SBM) should rightly be considered higher risk companies to hold in the gold space, and are therefore probably not the sort of companies that people first entering the space are going to be attracted to. There's plenty of potential upside with both of them, but they have both been in strong downtrends and also in a downgrade/bad news cycle, and both could certainly go lower before they change trajectory and recover, and there are certainly no guarantees that either are going to get back to their previous highs any time soon. Also, in terms of management quality, Craig Jetson at SBM is still unproven and largely an unknown in my opinion, and Jim Beyer and his team at RRL are not as good as the original management team that built RRL up from scratch, most of whom now work for either CMM or EMR (Capricorn Metals / Emerald Resources). So neither SBM or RRL currently have management in place that I would consider industry leading or well above average, however both companies look like bargains to me regardless of that. When it comes to gold producers however, I do have a high risk tolerance, and I do realise that the cycles can last longer than many people might expect, so I'm taking a multi-year view on these companies. I do realise that it could take 2, 3, 4 or 5 years for them to come good, but I am confident that they're not going broke, they have good balance sheets, either very low or no net debt, both are highly profitable at current gold prices, and both have multiple gold mines producing gold now, as well as new gold projects at various stages of development, so strong prospects for future growth.

That said, in both cases (SBM & RRL), those new gold projects are experiencing development delays, and their current producing assets have recently experienced challenges, or they still are. So I can certainly understand why most punters would give them a wide berth.

In terms of Tropicana providing all of the necessary cash flow to fund the McPhillamys development, I was simply repeating what Jim said in the conference call when he announced the Tropicana acquisition. I have no idea if it's going to pan out that way or not. I was simply pointing out that the guidance is currently for no further capital raising, and the sell-down that occurred at the time and since suggests to me that the market does not believe Jim on that one, i.e. they DO think there will be another large CR. As I said last time, time will tell.

Thanks for the bear case Gprp. :)

I hold a small position in BGL IRL Gprp to keep me closely focused on them whenever they announce anything. I also hold them here on SM but again it's a small position because they are developers and there's additional risk with that. I don't have a strong opinion on their management at this point but the point you raised about allocating stocks to themselves (insiders) due to hitting their own "sustainability targets" when they are still in the development stage is valid and concerning. That's certainly happening at the expense of other shareholders, via dilution, and the hurdles are clearly rubbish. I hold because, as you said, the grades and costs are going to make Bellevue one of Australia's lowest cost and highest grade mines once fully operational, with a projected AISC of around $1K/ounce.

Just on Tropicana (yep, circling back to Tropicana once more), I understand the market's concern, however valuing a gold project that is currently producing from both open pit and underground operations and is still open in some directions so they haven't found all of the gold yet, is not an exact science. To Regis, they believed it represented value to them at the price they paid, and that will prove to be correct or incorrect based on what happens over the next few years, i.e. if their assumptions are correct or wrong. For a start, you can value it on the current gold price, or on an average of the gold price over a set period, or on what Regis think the average gold price is likely to be over the next 3 to 5 years. You can value it on the gold they have already proven exists there, or you can assume there is more based on ounces added to the resource over the last 5 years and what they know of the geology surrounding the existing operations. I do believe that if Regis hadn't bought that 30% of Tropicana, somebody else would have, and probably for around that price, because I understand that's what IGO wanted for it, and I don't think they were prepared to accept less. Again my assumptions there could be wrong, and Regis' assumptions could also prove wrong in the fullness of time, but we just don't know yet.

Certainly Regis is now in the doghouse from the market's perspective, for a number of reasons, and what they paid for their 30% of Tropicana is one of those reasons, but there are others that we've discussed at length here. When some of those more transient and temporary setbacks work through and things look more positive, I don't think the price paid for Tropicana is going to remain such a contentious issue. It will fade. So much of course depends on McPhillamys, and if and when it gets approved. If McPhillamys gets knocked back, I think there's certainly further downside for Regis, probably significant downside, but then a higher gold price would change all of that.

I remain a RRL shareholder. I'm pretty confident that McPhillamys will get approved at some point, with or without further concessions from Regis to satisfy local residents and landholders, but I have no idea how long it will all take. I can be patient with such things however. I have been before and it usually pays off for me. Not always, but usually.

15-Feb-2022: Yeah, I've been waiting for the gold producers' share prices to recover, but they just don't, not by as much as I think they should anyway.

As you said @Gprp the Gold price is up over US$1800, currently around $1850 as I type this, and the trajectory and the returns over all decent timeframes are positive:

And that's in US dollars - it looks EVEN BETTER (to me anyway) in Australian dollars:

[Source: goldprice.org: https://goldprice.org/Gold-price-history.html]

Certainly the returns (squircled in green, or more exactly: inside the rectangle with the rounded corners) are better in A$ over all of those time periods up to 5 years. It's only the 20 year return that is better in US$. Basically, in A$ terms, the gold price is back where it was in March 2020, May 2020 and November 2020, and yet even the Australian-listed major gold producing companies who have not been plagued with bad news, problems and guidance downgrades, were trading at substantially higher prices in those months (when the gold price was the same as it is now) than they are today. I've seen numerous occasions where gold producers' share prices did rise in percentage terms more than the gold price, and the majority of those gold producers all outperformed the major physical gold ETFs on the majority of those up days, but it seems that's when there is a rise in the gold price AS WELL AS a risk-on sentiment within the market on that day. The gold price sometimes rises and people still aren't interested in gold, but when they are interested, the producers do tend to rise by more than the gold ETFs and the gold price.

Today was a real mixed bag...

The physical gold ETFs are highlighted within that Blue rounded-corner rectangle, and most gold stocks UNDERperformed those ETFs today. Yesterday, they almost all outperformed the gold ETFs except for PNR, which fell -4.48% (-1.5 cps) - PNR then regained 1c today (+3.13%). There will always be stock-specific issues that cause the odd one or two to play away from the others, but I have noticed that many of them seem to move as a group, and today was not typical of that. But it's really the overall trend that matters more than the daily movements, and the trends have in many instances being going south east while the gold price has been heading north east. I guess the problem is that we are not in a strong gold bull market, in that we are not seeing strong gains in the gold price on consecutive days, it's more patchy. The overall trend was up in 2019, 2021 and so far in 2022, but 2020 was a whole different story - the gold price was all over the place, and we still haven't made it back to those mid-2020 A$2800+/oz levels. It should be noted that after very briefly getting above A$2800/oz, the gold price dropped right down to A$2200/oz over the next 7 months. It's been all north east since then however, and you can't say the same thing about too many gold stock share price graphs.

One possible explanation is that while the gold price is high, costs have been rising as well, including labour costs, which is partly a result of staff shortages due to the pandemic, so gold companies are now viewed as not being AS profitable as they likely were in 2020; still highly profitable, but not AS highly profitable as they were then when the gold price was at similar levels and they had lower costs (and higher grades of gold in the ore too in many instances). This is borne out by the much higher AISC we have seen these companies reporting in their quarterly reports and other reports, and also in their future guidance with many of the larger companies expecting higher costs than what they would have predicted back in 2020. That doesn't phase me too much, as the costs are still WAY below the gold price, but it is one thing that HAS changed.

I think a decent gold bull run is coming, and I'm well set for whenever that happens, but I reckon it's probably overdue now. There are plenty of things that could be the catalyst that gets it well underway, and the Ukraine situation is right up there, but I see others as well, including a possible NASDAQ downward re-rating, which could either be called a crash or a correction depending on its severity, if and when it happens. The DOW could do something similar, but I think it is more likely to be tech-led. I think the NASDAQ falls further than the Dow in that scenario. As always, hope for the best, but prepare for and position for the worst.

The only gold miner ETFs I've found contain global gold miners, and the majority of those miners are HQ'd in the USA, Canada, Russia, China, South Africa, etc. with only one of our Australian gold miners (Newcrest Mining - NCM) now in the global top 10. See here: The World’s Top 10 Gold Mining Companies - Elements by Visual Capitalist

Here's that top bit blown up to make it readable:

And here's some more from that website: [by Bruno Venditti, 19-Oct-2021]

[Don't know why that came out so small - you can click on the text (because it's a screenshot image) and it should get bigger, then click again to return to this forum post]

--- ends ---

Source: The World’s Top 10 Gold Mining Companies - Elements by Visual Capitalist

I know I've been saying that Northern Star (NST) are now in the global top 10, because that's what they said when they announced the merger with Saracen, that their market cap and gold production volumes would take them into that top 10. And it did; they now have a market cap of A$10.55 billion (based on today's A$9.04 closing price), and A$10.55 billion is US$7.57 billion, which would place them between the Russian based Polymetal International (at #6) and the South African based Gold Fields (at #7 on that market capitalisation line in the graphic above). However that article was written in October 2021 and was looking back at 2020 Production, so Northern Star didn't make the cut then, but they would now.

Northern Star recently guided for gold production of between 1.55m and 1.65m ounces in FY22, so let's call it 1.6m, as that's the mid-point of their FY22 guidance. In the 2020 Production list in the reproduced article above, 1.6 million ounces places NST between Canadian based Agnico Eagle (at #8 with 1.73m oz) and Polymetal (#9 with 1.4m ounces).

Of course that's comparing NST's FY22 guidance with those companies' actual CY20 production, and they might be producing more or less gold this year, I haven't looked that far into it. However, if NST had produced 1.6m oz in 2020 (that their guidance suggests they're going to produce this financial year) and they had their current market cap when the above article was written, then they would have been in position #7 on the m/cap line, and in position #9 on the Production list, so I think it's still OK to call them a top 10 global gold producer. However, we need a more up-to-date report to confirm that for sure, because market caps for those 10 companies have changed since October, and their production per annum will also have changed since 2020.

If and when I do see some more up-to-date info on that, I'll post it here in the "Gold as an investment" forum.

But back to gold miner ETFs. Leaving aside physical gold ETFs (like GOLD, PMGOLD, and the currency hedged QAU), the two ETFs I've come across that give you wide exposure to the globe's largest gold miners are GDX - VanEck Vectors Gold Miners ETF - and MNRS - the BetaShares Global Gold Miners ETF.

More Info: From: What are the Best Gold ETFs on the ASX in 2022? (stockspot.com.au)

What about the best gold miner ETFs?

For investors who want exposure to companies that explore or mine for gold, there are two ETFs available:

• VanEck Vectors Gold Miners ETF (GDX)
• BetaShares Global Gold Miners ETF – Currency Hedged (MNRS)

GDX provides exposure to the ~55 companies involved in mining gold and silver. It is unhedged with a large focus on North America charging 0.53% per year and has ~$466m in assets.

MNRS is a hedged version that invests in ~50 companies engaged in gold, silver or other metal mining. It is slightly more expensive because of the hedging protection, charging 0.57% per year, and is much smaller than GDX after only accumulating $58m since launching in July 2016.

There is a large overlap of holdings between the two with half of the companies in both ETFs, although GDX has more Australian gold mining companies. Lastly, GDX has tighter spreads than MNRS (0.31% vs 0.51% respectively).

--- end of excerpt --- from What are the Best Gold ETFs on the ASX in 2022? (stockspot.com.au)

More Info:

GDX - VanEck Gold Miners ETF | Snapshot

GDX - VanEck Gold Miners ETF | Holdings

MNRS-Factsheet.pdf (betashares.com.au)

MNRS ASX | Gold Miners ETF ASX | BetaShares

And, where was I...? Oh yeah, I'm not across all of these ex-Australia gold companies, and I don't get much Australian gold company exposure through either GDX or MNRS - they are too global for my liking, but certainly worth a look for anybody who wants that sort of exposure.

Hope that helps.

22-Feb-2022: And Regis (RRL) just announced they would not pay an interim dividend...