Risks Remain, But Dacian’s Recovery Plan Highlights An Abundance Of Leverage

Risks remain, but Dacian’s recovery plan highlights an abundance of leverage and upside after sell-off.

Newbie gold producer Dacian (DCN) served up some shock back in early June when it told the market that it should forget about its Mt Morgans operation being a 200,000 oz a year producer for 10 years at a cost of $A1,000 an oz.

Its June 5 stock price crashed from $1.58 to 51c, catching everyone in the market – and this space – on the hop.

To the credit of executive chairman and CEO Rohan Williams, Dacian has wasted no time getting back to the market with a five and an eight-year mine plan and a stated intention of not raising equity funds to see it through.

For those with memories of the 1968 classic kids film Chitty Chitty Bang Bang, it’s a case of up from the ashes, up from the ashes, grow the roses of success. There are some if and buts though with the new mine plan.

The five-year plan is for 170,000oz a year at an all-in-cost of $A1,340-$A1,440 an oz. So given the current gold price in local dollar terms and the ability for some judicious hedging, forward margins of $A500 an oz or so says straight up that the June 5 sell down was overdone.

That’s particularly so when no one doubts what Dacian said is the “significant potential” to extend the 170,000oz annual rate out beyond five years.

And speaking of leverage, PolarX is about to drill some deep holes into a highly-rated porphyry target courtesy of North American major Lundin. Read more +

Barry Fitzgerald

About Barry Fitzgerald

Barry Fitzgerald has covered the resources industry for 30 years. His column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age.

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