Avocet Mining saw its share price plunge on Friday after the gold miner admitted that it now expects its gold production for 2012 to be reduced from 160,000 ounces to between 135,000 and 140,000 ounces.
In addition, production guidance for 2013 has been lowered from the previous figure of 160,000 ounces to between 150,000 and 160,000 ounces.
The firm said the reduction reflects lower than planned availabilities among its own excavators, and among the rented excavators introduced in late 2011/early 2012 to increase waste stripping capacity, as well as the lower than expected plant head grades in the second quarter, with inadequate waste movement in the first half of 2012 limiting access to areas of higher grade ore.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Also having an effect was the fact that the processing rates were slightly lower than planned due to treatment of a higher proportion of harder transitional and fresh ore.
Furthermore, lower production in 2012 and additional mining costs mean that 2012 full year cash cost guidance has increased by $200 per ounce from previous guidance of $800-$850 to $1,000 - $1,050. For 2013, lower production and higher equipment rental mean that cash costs per ounce for 2013 are now forecast at $900 - $950.
In a statement the company said: "Since our last update on 3 May 2012, mining equipment availabilities have continued to be lower than planned and ore blending has not mitigated the effect of preg-robbing carbon and maximized gold recoveries to the extent it had done previously. As a result, full year 2012 guidance has been lowered to reflect the second quarter performance.
"Several measures have been introduced to ensure improved mining capacity during the second half of 2012 and into 2013. The action taken is expected to allow a higher rate of waste stripping, ensuring access over the next three years to ore at depth where grades are significantly higher."
Avocet has assured investors that additional rented excavators will be commissioned in the third quarter of 2012, further equipment has been orderded and that gravity separation for gold recovery on fresh rock will become increasingly effective.
Chief Executive Officer Brett Richards said: "We have had a difficult second quarter in 2012, with issues related to equipment availability continuing to affect mining rates and capacity. We continue to aggressively address the issues impacting production and envisage production of between 150,000 and 160,000 ounces for our revised 2013 production target. The Inata resource remains very robust and will continue to increase as we focus on exploration drilling in the Blahouro region.
"Ongoing work to increase our understanding of the resource will leave us better placed to optimise the production at the mine, and I am confident that this will allow us to maximise the value from Inata."
The share price plunged 33.62% to 100.10p by 13:18.
NR
Review: Eden Roc Cap Cana – fun, sun and golf in the Caribbean
Reeves delays cash ISA reform, but savers are not out of the woods yet
