ASX-listed gold producer Red 5 has flagged lower-than-expected production for the March quarter due to issues with the mill at its Darlot operations in Western Australia.

The company (ASX:RED) previously set a target of 16,000 to 19,000 ounces, but today told investors it is now more likely to be in the range of 12,000 to 15,000 ounces.

Investors didn’t like the news, pushing shares down 15.5 per cent to 6c on Tuesday morning. The shares were at 6.2c — down nearly 13 per cent — just after 11am AEDT.

Production was impacted “following recent issues relating to the gear and clutch on mill-1 at the Darlot mill”, Red 5 noted.

Milling operations are expected to resume by the end of this week.

Red 5, which has a market cap of just under $90 million, became a gold producer in October last year after purchasing the operating Darlot mine and King of the Hills project in Eastern Goldfields.

RED shares over the past six months.
RED shares over the past six months.

The company is now much closer to becoming profitable after substantially narrowing its loss in the second half of 2017 to $2.4 million from $72.2 million a year earlier.

Darlot contributed a net profit before tax of $2.8 million following gold production of 17,777 ounces and sales of 16,150 ounces since acquisition.

Red 5 now has $21.8 million in cash and metal accounts.

“Were pleased by the Darlot gold mine’s performance to date and were continuing to optimise gold production,” managing director Mark Williams told Stockhead.

The companys focus for the next two quarters will be on the commencement of underground development and mining at the King of the Hills project and resource definition activities at both mines.

Red 5 has launched a conditional off-market all-scrip takeover bid worth just over $4 million for unlisted public gold player Bullseye Mining. A bidders statement is due out by the end of March or early April.

Bullseye’s Laverton project is located about 30km to the north of the Darlot mine. Red 5 is also pursuing other potential acquisitions near its current projects.