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Why the Beadell Resources Ltd share price just plunged 19% to a 52-week low

The Beadell Resources Ltd (ASX: BDR) share price has been one of the worst performers on the market today with a massive 19% drop to a 52-week low of 22 cents.

As well as coming under pressure from a sell-off in the gold mining sector, Beadell Resources’ shares have been hit hard following the release of a disastrous quarterly update.

According to the release, the company’s all-in sustaining cost (AISC) rose 29% to US$1,161 an ounce from US$902 an ounce in the March quarter of 2016.

The miner sold 30,476 ounces during the quarter at an average cash price of US$1,221 per ounce, meaning the company’s AISC margin narrowed to just US$60 an ounce.

By comparison, Resolute Mining Limited (ASX: RSG) recently delivered an AISC margin of US$418 an ounce.

Why did it happen?

Management has blamed the sharp rise in its AISC on the impact of a strengthening Brazilian Real versus the U.S. dollar and a lower strip ratio.

A lower strip ratio during the March 2017 quarter resulted in no capitalisation of stripping cost, producing higher cash costs than previously budgeted.

Should you buy the dip?

While management is focusing on cost-cutting and expects its key Tucano mine to be fully optimised by mid-2018, I think its shares could still drift lower unless there are significant improvements in costs and production in the June quarter.

So for now I think investors looking for exposure to the sector should avoid the company and take a look at the bigger and more reliable players such as Evolution Mining Ltd (ASX: EVN) or Newcrest Mining Limited (ASX: NCM).

Alternatively, they could avoid the volatile sector altogether and invest in one of these high-quality blue-chip shares.

Top 3 ASX Blue Chips To Buy In 2017

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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