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Why the Dacian Gold share price crashed 67% lower today

The worst performer on the All Ordinaries index on Wednesday by some distance has been the Dacian Gold Ltd (ASX: DCN) share price.

In afternoon trade the gold miner’s shares are down a massive 67% to 52.5 cents.

Why has the Dacian Gold share price been crushed today?

Whilst a number of gold miners such as Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) have sunk lower today after investors’ risk appetite increased, Dacian Gold has come under significant pressure due to the release of a disappointing update on its Mt Morgans operation.

According to the release, the company has made a material revision to its production and costs guidance for the June quarter due to underground contractor performance issues resurfacing and a lower-than-expected grade performance on subordinate lodes.

Management had previously advised that it expected to produce 50,000-55,000 ounces of gold at an All-in Sustaining Cost (AISC) of A$1,050 to $1,150 an ounce.

However, it now expects to produce just 36,000 to 38,000 ounces at an AISC of A$1,500 to $1,600 an ounce. With the gold price in Australian dollars currently at $1,895 an ounce, Dacian Gold is still profitable, but nowhere near the level that investors were previously expecting.

Dacian Gold’s executive chairman, Rohan Williams, was disappointed with the quarter but optimistic on the future.

He said “Whilst the downgraded June quarter production guidance is disappointing the Company notes improvements in both equipment availability and mine development advance at Westralia are clearly evident and heading in the right direction. Many of the issues with fleet availability have already been resolved and a focus on capital development in the short term will open up more work areas thus improving production going forward.”

FY 2020 guidance.

Dacian Gold also released its preliminary FY 2020 production and cost guidance this morning.

Management advised that it expects FY 2020 production to be in the range of 150,000-170,000 ounces at an AISC of A$1,350 to $1,450 an ounce. Final FY 2020 guidance will be released by the end of June following completion of further optimisation analysis.

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Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.

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