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Dacian Gold (ASX:DCN) share price falls despite solid update

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The Dacian Gold Ltd (ASX: DCN) share price is slumping 1.9% lower in today’s trade despite a solid quarterly update from the Aussie gold miner, as gold prices retreated overnight.

Why is the Dacian Gold share price slumping today?

Dacian reported a strong net cash position for the quarter ended 31 December 2020 (Q2 FY2021). The Aussie gold miner produced 27,162 ounces of gold at an all-in sustaining cost (AISC) of $1,430 per ounce in the December quarter.

The mining group reported first half production of 59,961 ounces at an AISC of $1,356 per ounce. That means Dacian is on target to meet its full year guidance of 110,000 to 120,000 ounces at an AISC of $1,400 to $1,550 per ounce.

The Dacian Gold share price slumped lower in early trade following the update as gold prices retreated from a nearly two-week high. Today’s update comes after strong quarterly results from competitors Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) were also released this week.

Both the Saracen and Northern Star share prices jumped higher in early trade before retreating to below their opening prices.

Dacian reported cash and gold on hand at 31 December 2020 of $37.9 million. Total debt was $23.4 million after repaying $15.7 million in the quarter. That gave Dacian a net cash position of $14.5 million, a $15.1 million quarter-on-quarter improvement.

A new merger announcement, which came on 16 November 2020, was the big news for Dacian during the quarter. Dacian announced an all-scrip merger with NTM Gold Ltd (ASX: NTM) which saw the NTM share price rocket 44% higher. The $96.4 million merger is set to close in mid-March 2021 with the aim of creating a $285 million gold company.

Dacian Managing Director Leigh Junk said it was a “robust” result that has “significantly improved” the financial position for the company. Mr Junk said a stronger balance sheet and the merger will help Dacian to “explore regional consolidation” and leverage its significant infrastructure in the Laverton goldfields in Western Australia.

Foolish takeaway

The Dacian Gold share price slumped lower in early trade before paring back some of those losses in the late morning. That’s despite a solid quarterly update that confirmed Dacian was on track to meet its full-year guidance as gold prices edged lower.

The S&P/ASX 200 Index (ASX: XJO) has edged 0.2% lower to 6,804.50 points at the time of writing.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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