13-April-2024: Update: I don't think McPhillamys is going to progress much in the next little while because of significantly increased costs - probably best explained by the MoM lads here:

Regis disappoints with McPhillamy's numbers [03-April-2024]

McPhillamys-Gold-Project-Definitive-Feasibility-Study-Update.PDF [03-April-2024]

So yeah, nah... Sold my Regis shares out of my SMSF after I digested all of that and I now have zero direct exposure to RRL either here or there (or anywhere).

My current opinion is that there are better gold companies to be invested in at this time than Regis.

My previous thoughts (when I held them) are below:

12-June-2023: My $2.78 price target (PT) is probably a LOW price for this company once they start producing gold from McPhillamys, which has now received the necessary development approvals to go ahead. McPhillamys is still farmland at this stage, so production is a couple of years away, and they are still working through the final FID alongside further issues that they still need to resolve. The recent approval, which I did discuss here at the time, did come with a raft of conditions, as expected, which are designed to protect the nearby Belubula River, and the rest of the surrounding environment.

The headwaters of the Belubula River - which runs into the Lachlan River near Cowra, then the Lachlan River runs into the Murrumbidgee River (near Balranald) which runs into the Murray River (at Boundary Bend, just east of Robinvale) which runs all the way to the sea at Goolwa (south east of Adelaide, S.A.) - are in and around the McPhillamys area.

WaterInsights - WaterNSW

The Belubula River actually starts about 10km north east of Blayney, but it's just a stagnant creek until it gets down to Blayney.

Below is what the Belubula looks like where the NSW Mid Western Highway (A41) crosses it about 2km northeast of Blayney:

Note the "Save the River" sign on the right.

The photo above is looking east, away from Blayney. The following photo is from the middle of that bridge looking south, i.e. downriver.

Not much of a river at this point, but the start of the river.

And McPhillamys is North of this point, above the start of the Belubula River, but considered to be in an area that forms part of the Headwaters (or source water catchment area) for the Belubula River.

Here's an example of the type of protest group that is against McPhillamys and against mining in the area altogether.

https://www.facebook.com/BelubulaHeadwatersPG/

So, while RRL HAVE received approval to develop McPhillamys as long as they comply with a heap of conditions and rules, there is still opposition to the mine, as there often is. So it's not a done deal until they get the thing into actual gold production, and that's not going to happen before CY 2025 or 2026 I would imagine.

Meanwhile, Regis have one of the most disastrous hedge books of all of the mid-cap Aussie gold miners, as explained here:

Regis Resources takes $27 million hit on hedging book in December quarter | The West Australian

Regis Resources takes $27 million hit on hedging book in December quarter

Danielle Le Messurier, The West Australian, Wed, 25 January 2023 10:26AM.

Haul trucks at the Tropicana gold mine. Photo Credit: Marc Esser.

Regis Resources took a loss of $27 million on its hedging book in the three months to December, delivering 25,000 ounces of gold at approximately $1571 an ounce.

That was well below the spot gold price of $2675 at the end of December. The Subiaco-based gold producer and explorer sold 121,3000/oz of gold in the quarter at an average price of $2412, which included the hedge impact.

The company’s quarterly report on Wednesday showed it generated operating cash flow of $93m from the Tropicana project east of Kalgoorlie— which it shares with AngoGold Ashanti — and Duketon project, north of Laverton.

Gold produced over the quarter totalled 117,3000oz all at average all-in-sustaining cost of $1760/oz.

Gold has been rallying since early November on signs the Federal Reserve was turning less hawkish. Spot gold was trading around around $US1937/oz on Wednesday.

The impact of Regis’ hedge book could grow, with Regis set to deliver a further 50,000oz into the hedging program over the remainder of fiscal 2023 — at 25,000oz a quarter and all at $1571/oz, below its current all-in-sustaining costs.

Another 120,000oz will be delivered in equal instalments of 30,000oz per quarter in fiscal 2024.

Guidance for the 2023 financial year remains unchanged with Regis forecasting 350,000-500,000kz at an all-in-sustaining cost of $1525-$1625/oz.

“The significant inflationary environment experienced in the September quarter continued in the December quarter, but we have seen some recent easing of pressure through reduction in the cost of diesel,” Regis Resources managing director Jim Beyer said.

“Despite this background of cost pressures, the planned increased production in the second half means we are anticipating our AISC unit costs to lower albeit to the top end of full year guidance, with efforts to contain costs continuing to be an important focus.”

--- end of excerpt --- [from that January article in the West Australian newspaper]

In short, the management at Regis (RRL), led by their MD Jim Beyer, entered into a fair amount of gold hedging (which is forward selling of future gold production at set prices) when gold prices were substantially lower, to guarantee future profitability, and those hedges were agreed to at prices that were well below the current gold price levels (which have risen substantially). Meanwhile, Regis' costs have increased, and in some cases their costs are now above the prices of some of that hedged production, so they will be selling a portion of their production at prices that are lower than their actual costs of production, so at a loss. Until they close out all of those low-priced hedges, they are only getting limited exposure to the current high gold price.

For context, the spot gold price is currently A$2,900/ounce, and has recently (in the past month) spent time over A$3,000/ounce. All of Regis' remaining hedges - which are scheduled to expire in June NEXT year (2024) are set at A$1,571/ounce. That's a LONG way below the spot price, and below most gold miners' costs these days.

Source: RRL-Change-To-Hedging-Structure-28May2021.pdf

Further Reading: ASX RRL: Gold miner Regis sinks on operational hiccups, wet weather (afr.com) [17 April 2023]

The original management that built Regis up from nothing, by successfully developing their Duketon assets, have all departed the company, and most of them turned up at either Capricorn Metals (CMM) or Emerald Resources (EMR) who both have better share price charts that Regis do, by a LONG shot.

The Senior Management and Board at Regis are therefore relatively new, and they haven't covered themselves with glory thus far, with the hedging debacle being their worst mistake, but there have been others.

So, a LOT rides on McPhillamys, because without McPhillamys, unless RRL get a decent takeover offer, I can't see the market getting super excited about this company. If they extinguished those hedges early, or if we just wait until the hedges have all been filled - which they will be by 28-June-2024, then they might get a positive re-rating, as long as the Aussie gold price was still nice and high at that time, but McPhillamys is the big one.

I think McPhillamys has the potential to be as positive for Regis as nearby Cadia has been for Newcrest (NCM), but it's a waiting game until they get McPhillamys into production, and many market participants don't have the patience to wait for these catalysts to play out. I expect Regis to get cheaper as we get closer to the end of June. However, I won't be adding to my positions, because I have enough exposure already. There is still risk there. Significant risk. And there are plenty of safer options within the sector, however I can justify maintaining an allocation within my gold sector funds to Regis because IF they get McPhillamys into production in a timely manner, and don't enter into more stupid hedges in the meantime, there is significant upside - in my opinion - that does justify that risk - for me.

But because of the risk, which is real, I wouldn't bet the farm on them.

12-Dec-2023: Update: Marked as stale. I was going to reduce my price target, but they've just closed out their hedgebook - see here: Closure-of-Hedge-Book.PDF [11-Dec-2023] so that is a real positive. They are now 100% unhedged and fully exposed to the high spot gold price.

The investment thesis still heavily relies on McPhillamys getting up and running, and that's still a few years away, with progress remaining very slow on that, despite the conditional approvals they've received - but I'm thinking that this closing out of their terribly priced hedgebook is a huge step in the right direction in terms of getting some positive market interest again.

Not sure if the market will respond straight away though. It might take a few more positive announcements - particularly concerning McPhillamys - for the market to turn positive on Regis again. However, WITH McPhillamys, Regis should hit $2.78/share at some point, so no change to that share price target today from me.

Disclosure: I no longer hold Regis here on SM or in my largest real money portfolio - they are only a smaller position in my SMSF now. That could however change at any time, without notice.

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13-Apr-2024: As disclosed at top of this lot, I have now sold that small RRL position out of my SMSF, as I no longer think McPhillamys is likely to get built within the next 3 to 5 years, and there are far better places to invest in the Aussie gold sector at this point in time than in RRL. I no longer have any direct exposure to RRL.