|Regis Resources' McPhillamys gold project in New South Wales, Australia.
Source: Regis Resources
The next three to six years look to be critical for Regis Resources Ltd. to find a "big whale" as the mainstays of its existing ore supply appear to be reaching their end of life.
In its Oct. 23 report for the first quarter of fiscal 2021, Regis said quarterly production was 81,567 ounces, which Managing Director and CEO Jim Beyer described on a same-day analyst call as a "relatively soft" result. Output fell from 87,260 ounces in the previous quarter and 87,633 ounces in the same quarter a year ago.
Shares closed the day 4.32% lower.
The company maintained full-year guidance of 355,000 to 380,000 ounces at all-in sustaining costs, or AISC, of A$1,230 per ounce to A$1,300/oz, as above life-of-mine average stripping ratios continue. AISC for the September quarter came in at A$1,400/oz, with cash costs before royalties of A$1,072/oz.
Cash and bullion increased 8% to A$225 million for the period, as Regis sold 60,938 ounces of gold at an average price of A$2,256/ounce, with 27,506 ounces on hand by quarter's end which was subsequently sold in October.
The company has 7.7 million ounces in resources and 3.6 Moz in reserves, according to its Oct. 14 Diggers and Dealers Mining Forum presentation.
In August, Regis acquired the Ben Hur deposit which has a 5.8 million-tonne resource at 1.6 g/t gold for 290,000 ounces, to add life to its operations in the West Australian Duketon Greenstone Belt, where its properties include the Duketon Northern Operations the Duketon Southern Operations, the satellite Rosemont mine, the Duketon Satellite project and the Duketon gold project.
Rosemont's production was in line with the prior quarter at 23,296 ounces amid the planned increasing contribution from the underground, and Regis said it expects to hit the high-grade Main Zone in the "latter part of the year."
Regis also completed drilling at the Garden Well underground project which confirmed a "wide, robust high-grade mineralized zone" beneath the pit, and a prefeasibility study is due in the December quarter; and continued regional exploration testing targets at Betelgeuse and Matts Bore on western side of the Duketon Greenstone Belt.
The company also submitted the development application for its McPhillamys gold project in New South Wales for which it's targeting a potential 200,000 ounces per annum open pit operation.
Canaccord Genuity Mining Analyst Tim McCormack said that after the Ben Hur transaction, "there are not a lot of bolt-on opportunities inorganically" in the region. "There's no company sitting out there with a big asset that's a logical fix for what is a bulk tonnage operation," he said.
|Resource drilling at Garden Well South underground.
Source: Regis Resources
"So there is a bit of pressure on exploration to convert what is quite a large resource base into reserve, because for open pits we generally just model the reserves. So we're seeing mine life stress, particularly at Duketon North, which has to get fixed by exploration."
Thus, McCormack believes the next three to six years will be "pretty critical" for Regis based on the existing resource base, and his concern, along with others on the analyst call, is how quickly the miner can bring a new satellite online.
Beyer said the Duketon area is well suited for mining.
"If we found a deposit, it doesn't take us too long to quickly decide on — we'd obviously mobilize a massive drilling fleet to get that information as quickly as we could," he said.
When probed on this, Beyer said "we're chasing the big whale," with regional exploration efforts "chasing a 1 million or 2 million-ounce deposit that gives significant extension of life."
Beyer told Diggers and Dealers that Regis has allocated A$35 million for exploration in fiscal 2021, up to A$60 million for growth capital, plus between A$15 million and A$60 million for McPhillamys, if it gets approved early.
His presentation stated that McPhillamys is one of the largest undeveloped open pittable gold resources, with a 2.29 Moz resource and 2.02 Moz reserve, with more potential at Discovery Ridge which has a 10.4 Mt mineral resource at 1.2 g/t gold for about 390,000 ounces.
Moolart Well and Garden Well, which have been by far the mainstays of the existing ore supply, produced 20,307 ounces and 37,963 ounces, respectively, for the quarter.
Garden Well's production was lower due to reduced ore tonnes milled due to mill shut for reline, a series of slips at the Erlistoun deposit that delayed scheduled access to high grade ore, and the consequent rescheduling of lower-grade Tooheys Well ore into the mill which meant slightly lower grades and recoveries.
McCormack said both assets, particularly Moolart Well, are coming towards the end of their life, while Regis' cost profile is transitioning upwards year on year.
Given Beyer's comment on the call that Regis has 11 pits running across its operations, plus an underground mine, McCormack said the challenge will be to keep the processing capacity spread across the Duketon operations fully utilized.