Why the Dacian Gold (ASX:DCN) share price is soaring 15% higher today

The Dacian Gold share price is up more than 15% today following the company's preliminary September quarter update. Here's what was said…

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The Dacian Gold Ltd (ASX: DCN) share price is rocketing higher today, up 15.15% in afternoon trading (at the time of writing). The rise in the Dacian share price follows on the company's preliminary September quarter update, released to the ASX earlier in the day.

Today's gains will come as welcome news to shareholders, who saw the Dacian share price plummet 71% from 6 January through to 21 July.

Since that low, the share price has regained nearly 27%, but still remains down nearly 61% in 2020. By comparison, the All Ordinaries Index (ASX: XAO) is down almost 10% year to date.

At the current price of 38 cents per share, Dacian Gold has a market capitalisation of $211 million.

What does Dacian Gold do?

As the name implies, Dacian Gold is a gold producer, based in Western Australia. The company's 100% owned Mount Morgans Gold Operation is located in a region containing numerous multi-million-ounce gold mines. Gold production at the mine commenced in March 2018. Mount Morgans is supported by Westralia, consisting of the Beresford and Allanson underground mines, and the company's Jupiter open pit operation.

What's causing the Dacian share price to rocket?

Dacian's preliminary September quarter update stated the company had produced 32,799 ounces of gold for the September quarter. It noted this tracks well against its 2021 financial year guidance of 110,000-120,000 ounces. Most of the gold was sourced from Dacian's Jupiter open pit mine.

Dacian also paid down $25 million of debt in the September quarter. Its total cash and gold on hand as at 30 September stood at $38.5 million. With the company still having a total outstanding debt of $39.1 million, this brings its net debt to $600,000.

Additionally, Dacian's hedge commitment fell by 23,101 ounces, bringing its hedged position to a total of 61,488 ounces at an average price of $2,114 per ounce. That's still considerably below the current market price for gold of $2,657 per ounce, but it's higher than the average price of the company's previous outstanding hedge position.

Addressing the results, Managing Director, Leigh Junk stated:

This is a great start to the financial year and positions Dacian favourably to meet its annual targets during FY2021. The strong operating performance has translated into a much-improved financial position with total debt and hedge commitments further reduced. I'd like to thank the team for their excellent effort and look forward to continuing the momentum at Mt Morgans.

With the company well on track to meet its production targets, and gold forecast to remain strong, the Dacian share price will be one to watch.

Motley Fool contributor Bernd Struben 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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