Big Dacian Downgrade Adds To Gold Gloom

By Glenn Dyer | More Articles by Glenn Dyer

Here’s another company that has learned that all that glistens is not always gold.

Earlier in the week, it was Gascoyne Resources which collapsed and went into administration because of mining and cost problems at a newish mine in the WA goldfields.

Yesterday it was Dacian Gold which saw a 67% plunge in the value of its shares (to 51.5 cents) which emerged from a trading halt yesterday morning after a downgrade of production guidance for the current quarter.

That saw the company’s market value plunge from $357 million to $115 million.

And there’s now a chance the company could be snapped up by a bottom fishing investor looking to hook a troubled group cheaply.

The shares were trading at $1.58 before the halt. Not only was there the output cut – to between 36,000 and 38,000 ounces, compared to previous guidance of up to 55,000 ounces, but there was the commensurate jump in costs (because of the lower yield).

The estimated cost per ounce for the current quarter jumped from $A1,150 per ounce to between $A1,500 and $A1,600 an ounce.

“The guidance revision follows underground contractor performance issues resurfacing, which have resulted in lower productivity than previously anticipated,” the company said in a statement yesterday.

“Final FY2020 guidance will be released by the end of June following completion of further optimisation analysis,” the company said yesterday.

And there have been other problems:

“In addition, lower-than-expected grade performance on subordinate lodes at Westralia and the hanging wall lodes at Jupiter (both mines) impacted planned production; The mining of the thicker, higher grade Cornwall Shear Zone at Jupiter is progressing well; On the 1 June, the ball mill motor failed. Gold production was suspended from the treatment plant for 3 days whilst the motor was replaced,” the company said yesterday.

Its preliminary 2019-20 production guidance is for between 150,000 and 170,000 ounces at a cost of up to $A1,450 per ounce. Gold currently sells for $A1,895 per ounce.

Dacian Gold Executive Chairman Rohan Williams said “whilst the downgraded June quarter production guidance is disappointing the Company notes improvements in both equipment availability and mine development advance at Westralia are clearly evident and heading in the right direction.

Mr. Williams said, “Many of the issues with fleet availability have already been resolved and a focus on capital development in the short term will open up more work areas thus improving production going forward.”

“Following several recent unsolicited enquiries from corporate entities, the Company has commenced a strategic review process to consider potential corporate and funding initiatives which may culminate in a change of control transaction,” Dacian said in yesterday’s statement.

Glenn Dyer

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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