Regis Resources has warned shareholders it faces up to $280 million in write-downs and is putting exploration and feasibility work at its McPhillamys gold operation on ice due to a lower prevailing gold price than when the mine was acquired.
The gold miner said it faced an impairment charge of between $150 million and $190 million at its Garden Well and Rosemount operations, relating to open pit pre-strip mining, deferred waste mining and pre-production costs, as flagged in guidance released to market in May.
Regis said it also faced an additional impairment of between $60 million and $65 million in relation to its McPhillamys gold operation in New South Wales.
Regis acquired the project in 2012 for an all-scrip package worth $157 million.
A review of the project since the acquisition, taking into account a 20 per cent fall in prevailing gold prices, showed its potential return on investment would not be sufficient to proceed.
Regis said it would not progress to a feasibility study at McPhillamys, but it will continue “cost-effective work”.
“The board believes that the significant gold resource at McPhillamys will deliver real value for shareholders at some time in the future and remains an important project in the company’s portfolio,” Regis said in a statement to the ASX.
Regis also warned of a further impairment charge of between $20 million and $25 million relating to exploration spending at its Duketon gold province.
The company said the writedown reflected the company’s strategy of focusing the bulk of exploration at Duketon on bringing projects with known resources into its mine plan.
It’s been a torrid half year for the Perth-based gold miner, which recorded a significant fall in production in the first six months of FY2014 due to major flooding at its Rosemont and Garden Well mines at the Duketon province.
Regis told the market in May it expected production to range between 305,000 ounces and 355,000oz of gold, down from its 450,000oz guidance.
The Garden Well and Rosemont mines were shut for three months due to the flooding.
Regis also released a quarterly activities report today, which showed total gold production for the three months to June 30 was 65,747oz at a pre-royalty cash cost of $1,010/oz.
Total gold production for the year was 270,759oz, significantly down from its May guidance.
During the June quarter Regis sold 59,648oz of gold at an average price of $1,411/oz, down from 66,249oz in the March quarter, which were sold at $1,447/oz.
Regis said its unaudited pre-tax profit for the year ended June 30 was $79 million, after lodging an audited profit of $201 million in the previous year.
The $79 million unaudited profit does not included the expected impairment charges.
At 9:30AM, WST, Regis shares were down around 2 per cent, trading at $1.77.
