https://www6.neo-svc.ubs.com/research/document/pubs/mar15/uet2935...

https://www6.neo-svc.ubs.com/resear...I1NDUwMjhiODc0OWM3YmYzZmUwYjJjMDUzODVhMGQzNDk

Latest UBS research 6-March 2015

Regis Resources
Operating update – more issues in the West

Event: March quarter operating update
Management has today released an update for its Western Australian gold mines. In January and February, Garden Well was hampered by lower than expected head grades and wet weather. Production over the two months totalled 15koz, suggesting the MarQ will be below guidance and our forecast of 31koz. At Rosemont, several pit wall failures have limited access to higher grade material; however, this has been offset by the ore mined delivering a positive grade reconciliation. Subsequently, the company still expects to deliver above guidance output for Rosemont. Group guidance for Mar-Q is now 65koz, versus UBS-e of 75koz. The company has also advised that the remaining $20m debt facility has been restructured to allow a single bullet payment in June 2017, thus improving flexibility around the potential resumption of dividends.

Impact: Guiding to lower end of range – impact on costs not quantified
As a result of the weaker operating result from Garden Well, management has advised that group production for FY15 will be towards the lower end of its previous guidance range of 305-355koz, which compares to our current estimate of 326koz. While no commentary was provided on costs, we would expect that our current AISC estimate of circa $900/oz is now at risk of being too low.

Action: Neutral maintained – let the dust settle
We maintain our Neutral view based on valuation. We have previously stated that we believe FY15 will be a quiet period for Regis, with management keen to rebuild confidence and deliver on previously stated guidance. The solid December quarter suggested the rebuild process was on track and that FY15 guidance could be met or bettered; but today's operational update has pulled the rug from under our feet. We still maintain the view that operational diversification remains important, and with McPhillamys off the agenda and Garden Well still problematic, a lift in exploration and/or M&A should not be ruled out.

Valuation: $2.11/sh (DCF, 9% discount rate)
Both our valuation and price target remain unchanged.

12-month rating Neutral *
12m price target A$2.10
Price A$1.91
RIC: RRL.AX BBG: RRL AU

Trading data and key metrics
52-wk range A$2.65-1.27
Market cap. A$0.95bn/US$0.74bn
Shares o/s 498m (ORD)
Free float 80%
Avg.daily volume ('000) 3,739
Avg. daily value (m) A$7.0
Common s/h equity (06/15E) A$0.41bn
P/BV (06/15E) 2.3x
Net debt / EBITDA (06/15E) NM

EPS (UBS, diluted) (A$)
UBS   Cons.
06/15E   0.18   0.18
06/16E   0.20 0.26
06/17E   0.23   0.26

Jo Battershill
Analyst

James Brennan-Chong
Analyst

Glyn Lawcock
Analyst