Gold: After a horror quarter, Dacian says it is firmly ‘back on track’
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In January, Dacian Gold (ASX: DCN) fired up its brand new Mt Morgans Gold Operation (MMGO) near Laverton in Western Australia.
The honeymoon didn’t last long. Dacian downgraded production guidance in the March quarter, and then on 5 June, told investors that the gold still wasn’t coming out of the ground as predicted.
June quarter guidance went from 50,000-55,000oz at an all-in sustaining cost (AISC) of between $1,050-$1,150/oz, to 36,000-38,000oz at an AISC of between $1,500-$1,600/oz.
AISC is a good measure to appraise the profitability of a project because it includes everything, from mining, refining and transport, through to administration and exploration.
This wasn’t a death knell for the company by any stretch – especially at +$2000/oz gold prices – yet wary investors dumped the stock at an accelerated rate.
In one horror day it fell from about $1.585 to 51.5c. The share price finished the week at 38c.
Dacian’s recovery hasn’t been quite so swift, but it’s now crawled off the mat to 87.5c per share.
A revised life-of-mine plan, released in July, will generate strong production, robust margins and substantial cash flow, he says.
It estimated average annual production of 170,000oz over the first five years (FY2020-FY2024) at a cost of A$1,340-$1,440/oz.
Total gold production over the 8-year mine life (FY2020-FY2027) will be 1.1 million ounces at costs of $1,280-$1,380/oz.
“We were obviously very disappointed that Mt Morgans did not perform in line with the scheduled mine plan during the quarter,” Williams says.
“However, we are confident that we have identified the key reasons for this, as outlined previously, and that the measures adopted and key learnings from our first full year of operations have been incorporated as part of the new life-of-mine schedule.
“We are continuing to see improvements across the operation, including positive trends with development and ore production as we access ore across three declines in Westralia and an uplift in grade at the Jupiter open pit as we progress into the Cornwall Shear Zone.
“We are comfortable with the revised production and cost forecasts and believe there is scope to grow mine life based on the very promising exploration results being generated at Mt Morgans.”
At the end of June Dacian held $45.6 million in cash and unsold gold, compared to $70.2 million at the end of the March quarter.
The company’s total debt was reduced by $18 million to $105.5 million.
Marmota (ASX:MEU) continues to find success sampling tree leaves to find gold deposits.
Marmota just concluded another round of drilling at the flagship Aurora Tank project in South Australia, which returned hits like 4m at 30g/t gold from 20m.
It also managed to open up a new high-grade zone to the north west, with multiple intersections including 4m at 10g/t, 4m at 8.9g/t, and 4m at 8g/t. Marmota said the new zone is open in “multiple directions”.