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Highlights
- DCN share price reached its lowest in five years, tripping about 32% today (17 June, 2PM AEST).
- Dacian is to shut down its open-pit operations at Mt Morgans because of the high inflationary environment.
- Changes in the gold miner’s business include a new CEO, the exit of the MD and new plans for exploration.
The share price of Dacian Gold Limited (ASX:DCN) plummeted 32% by afternoon today after the gold miner announced the shut down of its open-pit mining operations at Jupiter at Mt Morgans in WA. DCN shares exchanged hands at AU$0.115 before ending the day’s trade, being its lowest price in the last five years on ASX.
Inflation hit Dacian Gold shuts mining at Jupiter, Mt Morgans
Dacian Gold has suspended its operations at Jupiter within the Mt Morgan project amid inflationary cost pressures. Other operational changes are also taking place, such as the entry of a new CEO into the company.
According to a presentation shared by Dacian today, its current operating model seems unfeasible to handle inflation. As per Dacian, the mining industry has experienced significant cost increases in the last twelve months. The cost of labour, fuel and other consumables has increased materially. As a result, margins have eroded, taking a toll on return on capital.
Supply chain challenges and approval delays have worsened Dacian’s current operating environment, leaving the company to believe that its current contractor mining approach is no longer viable for survival amid inflation.
The company has therefore planned to pause the Jupiter open pit mine by the end of June 2022. Dacian will continue to focus on underground operations, stockpile processing and drill testing at Jupiter.
However, it has pushed back open pit mining at Redcliffe.
Further, MD Leigh Junk has left the organization, and the present GM for Geology and Exploration Dale Richards has been appointed as CEO.
Management Commentary
According to Mick Wiles, non-executive chair Dacian Gold Limited, the company needs to reset its strategy.
With the decision to shut down Jupiter mine works, Dacian is pivoting to exploration while focusing on the significant potential beneath and along the Jupiter open pits. He believes the strategic value of Dacian’s processing facilities and infrastructure at Laverton Leanora gold belt underpin the company.
Wiles believes Mt Morgans has a large operating processing facility having a notable replacement value. Given the high-cost environment, substantial existing stockpiles, expanded pool of projects, and compelling drill targets, the company is focused on optimising its assets to maximise shareholder value.
Dacian’s focus on future
Dacian is to continue its underground operations till previously developed stopes at Beresford and Allanson mines are mined, estimated by Q1-FY23. Dacian is to utilise the existing large stockpiles as the main source of ore feed for the Mt Morgans mill in FY23. Dacian is now claiming to be focusing on increasing resources and exploration in and alongside the Jupiter open pits. It will also continue exploring other high-priority targets using its new operating model. Dacian wants the new operating regime to be leaner, reducing costs and maximising future cash flows.
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