Iron ore-turned-gold explorer WPG Resources has opted for a change in strategy that will see production drop in the short term at its Challenger mine in South Australia.

WPG (ASX:WPG) will “de-emphasise high-cost remnant mining” in older parts of the operation.

Shares slipped about 13 per cent to 2c following the news on Friday. In the past year, WPG shares have had almost 76 per cent wiped off their value — tumbling from the 8.3c they were trading at in late January 2017.

WPG shares over the past year. Source:
WPG shares over the past year. Source:

“Although we now expect gold production to be lower than previous guidance, we believe that short-term pain will lead to longer term gain,” chief Wayne Rossiter said.

“This short-term reduction in gold production, coupled with an increased focus on developing additional stopes in the Challenger Deeps area, will provide greater flexibility in production opportunities going forward.”

A stope is a step-like level in a mine.

WPG estimated December quarter production would be 11,000 ounces instead of the previously flagged 17,000 to 18,000 ounces.

The forecast for the 2018 financial year is now 60,000 ounces, down from between 70,000 and 80,000 ounces.

Old area, new focus
Accessing the Deeps area was a key objective when WPG bought the mine nearly two years ago.

The mine operator Challenger Gold Operations — a wholly owned subsidiary of WPG — secured a $20 million loan with underground mining contractor Byrnecut Group in late December.

WPG and Byrnecut are working to finalise an optimisation study by February to de-emphasise short-term production from high-cost remnant mining in the older parts of the mine, and focus more on developing the virgin Challenger Deeps area, where stoping will start in February.

The company has also made some senior management changes. Technical director and chief operating officer Cornel Parshotam has shifted into a non-executive director role.

WPG said Mr Parshotam was an integral part of the executive team responsible for bringing the Tarcoola gold mine in South Australia into production, as well as in the implementation of the turnaround strategy at Challenger.

Meanwhile, Henry Andryszczak, currently mine manager at Tarcoola, will become acting general manager of the Challenger and Tarcoola mines.

The current general manager, Jon Holden, is leaving to “pursue other opportunities”, WPG said.