Cost Concerns for Regis as La Nina Holds Sway

Gold miner Regis Resources revealed a story that will become more familiar in coming months from the resources sector as the continuing wet weather (thanks to La Nina) impacts mining and exploration efforts.

Miners with open cut operations (such as gold and copper mines in WA, South Australia, NSW and parts of Queensland and coal mines in NSW (see Whitehaven story) and Queensland are at risk.

And the lower production will see mining costs rise as fixed costs are spread across fewer tonnes or ounces.

Regis on Monday (along with Whitehaven on Friday) revealed the considerable impact of the wet weather.

The report saw Regis shares sold-off after cutting its full-year guidance due after heavy rain earlier this month damaged the partially built Rosemount Main Pit at its Duketon project in Western Australia.

Regis told the ASX that as a result of a geotechnical incident involving a wall slip at its Rosemont Main Pit and other operational challenges limiting its ability to absorb the loss of high-grade feed, the Company’s full year guidance has been changed.

The shares dropped as much by 23% at one stage and ended down more than 14% at $1.86.

Regis said it now expects the Duketon Project to produce up to 340,000 ounces of gold in the year to June 30, rather than between 340,000 and 380,000 ounces.

Total company production will be between 420,000 and 475,000 ounces, down from a maximum of 515,000 ounces. Guidance for the Tropicana mine remains unchanged.

However, the lower production forecast means all-in-sustaining-cost (AISC) guidance for Duketon is now estimated to be 10% to 15% higher at between $1,540 and $1,610 an ounce, above the previous guidance of a maximum of $1,410.

This took the whole company AISC up to around $1,500 an ounce, compared to a previous maximum of $1,365.

“The anticipated increase in AISC is primarily because of the lower production over FY22 period, while increases in prices for consumables and some contract labour for mill maintenance costs have also contributed,” Regis explained.

It said it does not consider that this AISC increase is a permanent reset of its cost base, as production is expected to lift again at Duketon next year.

Regis Resources said heavy rains at the unfinished Rosemount Pit in January caused an 800 tonne rockfall, without any injury. The principal geotechnical engineer found “continuing was considered unsafe (and) the decision was made to permanently stop all activity in Rosemont Main Pit”.

“At that point, the impact on production for 2022-23 was unclear and so the decision was made to request a trading halt.”

“This event and its impact are confined to the Rosemont Main Pit and will have no negative impact on the ongoing operation of the Rosemont Underground or Rosemont North Pit,” the company assured shareholders.

“The pit was expected to deliver approximately 18,500 ounces of high-grade ore at 2.6 grams in 2022-23 after which the Rosemont Main pit would be completed. Evaluations concluded that this high-grade ore can only practically be replaced in the mill feed by low-grade stockpiles for the remainder of 2022-23.”


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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