Why did this ASX gold share just crater 40%?

What did Dacian announce to the ASX that has its shares in a tailspin?

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Key points

  • Dacian shares plummet in value by 40% to 10.2 cents today 
  • The company stated that inflationary cost pressures have forced it to make changes to its Mt Morgans operations 
  • Open pit mining operations at Jupiter will be suspended by the end of this month 

One of the worst performers on the ASX today is the Dacian Gold Ltd (ASX: DCN) share price.

The gold miner's shares have lost 40% during midday trade to a new 52-week low of 10.2 cents apiece.

For context, the All Ordinaries Index (ASX: XAO) is down 2.32% to 6,626.5 points following heavy losses on Wall Street overnight.

What's happened to Dacian shares?

Investors are fleeing the Dacian share price after the company delivered an update regarding its Mt Morgans operations.

In its release, Dacian advised the operating environment has rapidly changed over the last 6 months. This comes after significant inflationary cost pressures have impacted the business leading to an uptick in Dacian's cost base.

As such, the management has been forced to conduct a review of its operating strategy with the following decisions made:

  • Open pit mining operations at Jupiter to be suspended by the end of this month
  • Underground operations to continue until the previously developed stopes have been mined in Q1 FY23
  • Open pit mining at Hub at Redcliffe to commence later in FY23 following receipt of mining approvals
  • Processing of existing stockpiles totalling roughly 5 million tonnes will begin in Q1 FY23
  • Drill testing to focus on high-priority exploration targets at Jupiter throughout FY23

Overseeing the change, Dacian general manager for geology and exploration, Dale Richards, has been appointed as CEO.

This follows outgoing managing director, Leigh Junk's resignation after spending 3 years with the company.

Dacian non-executive chair, Mick Wilkes commented:

In light of the current high inflationary environment, the Board has taken the decision to reset the company strategy by discontinuing the current open pit mining operations at Mt Morgans.

In doing so we are pivoting to exploration and a focus on the significant potential we see beneath and alongside the Jupiter open pits. This along with the strategic value of our processing facilities and infrastructure in the Laverton Leanora gold belt underpins the company.

Dacian is forecasting cash and gold-on-hand of approximately $17 million at 30 June after a $12.75 million bank debt repayment. 

Dacian share price snapshot

It has been a rollercoaster ride for the Dacian share price, with large volatile swings over the past 12 months.

Adding to today's losses, the company's shares are down 60% since this time last year. This is a big difference to when its shares touched a 52-week high of 32 cents in mid-April.

On valuation grounds, Dacian presides a market capitalisation of roughly $184.46 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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