Carbine Resources shares tumbled 56 per cent on Thursday after the junior gold and copper explorer told investors costs would be higher-than-expected at its Mount Morgan project in Queensland.

An economic review of the project shows that all-in sustaining costs – that is, costs including all expenses – have increased to $862 per ounce from $549 per ounce, which was the estimate in the earlier feasibility study.

The culprits are higher cyanide consumption and lower by-product credits due to a lower pyrite price and being unable to produce market-grade copper sulphate, which attracts a premium over other copper products.

As a result, Carbine (ASX:CRB) says it will scale back project spending to preserve its cash reserves while it tries to negotiate better offtake terms, improve operating conditions and secure project funding.

The company had $3.9 million cash in the bank at the end of December.


CRB shares over the past year.
CRB shares over the past year.

The higher costs and relatively high pre-production capital cost of $87 million mean Mount Morgan is no longer a good development proposition.

“Since April 2014, Carbine has spent $12.7 million and has been 100 per cent focused on Mount Morgan,” managing director Tony James said.

“It is now abundantly clear that for Mount Morgan to be bankable, all stakeholders will need to make significant amendments to their respective agreements with the company and the project.

“Carbine will now focus on seeking variations to the various corporate and government agreements considered necessary to improve the returns on the project to an acceptable level.”

Shares reached a 52-week low of 2.8c on Thursday before recovering slightly to close at 3.5c.

Carbine is still waiting on environmental approval for the 1.1-million-tonne-per-annum operation from the Queensland government.

A decision is due to be handed down in May.