Garden Well started production in the September quarter, but Regis said yesterday that mill throughput had been restricted to 3.8 million tonnes per annum, against nameplate of 4Mtpa, due to mill feed of exclusively oxide ore with high moisture content from mining of upper levels in the pit.

The ore has caused material handling issues through the primary crusher in the short-term before transitional and fresh ore is reached in the coming months.

To combat the short-term issue, Regis has installed a grizzly screen to allow ore to bypass the crusher, which has seen throughput to jump to 5.2Mtpa this week.

A jaw crusher and ore stacker being installed this week were expected to further improve throughput.

Regis expects production for the December quarter for Garden Well to be 50,000-55,000 ounces of gold, against Patersons’ estimates of 60,000oz.

Patersons said the issues appeared to have been resolved and there was no impact expected going forward.

“However Patersons expects a marginal cost increase resulting from the higher milling throughput of circa $40/oz for the second half of FY13,” resources analyst Gary Watson said.

Garden Well produced 17,000oz gold in the September quarter and Regis has left guidance for the second half of the financial year unchanged at 130,000-140,000oz.

Assuming maximum production within those guidance ranges was reached, Garden Well production for the full year would come in at 222,000oz, at the lower end of the previously announced FY13 guidance of 220,000-240,000oz.

“Production start-ups rarely go smoothly and we regard the above mentioned issues as a minor speed bump, however Regis is seen by the market as a premium operator and in the short-term we expect a harsher that normal reaction to the downgrade,” Watson wrote.

It seems Watson was right, with Regis shares slumping by as much as 9.5% or 50c to $4.80 this morning.

But there was still plenty of good news from Regis, with the company upgrading the guidance for its other mine at Duketon, Moolart Well.

Full-year guidance was increased to 100,000-110,000oz from 95,000-105,000oz.

The company also announced it had fully repaid its $30 million debt facility and was now debt free.

Regis also reiterated its intention to start paying dividends at the end of FY13.

The company said it was targeting a 20c per share payment for the maiden dividend in September 2013, and the long-term plan was to establish and maintain a dividend payout ratio in the order of 60% of net profit after tax.

In September Regis posted a maiden profit of $68.2 million for FY12, which is set grow in the current period due to the addition of Garden Well and the upcoming commissioning of the Rosemont mine.



Patersons maintained a hold recommendation but lowered its price target to $5.46 from $5.53.

Regis shares had partially recovered and last traded 4% lower at $5.08.