Why did this ASX 300 gold share just crash 30%?

This gold miner is having a difficult day. But why?

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The Tietto Minerals Ltd (ASX: TIE) share price is having a terrible session on Tuesday.

In morning trade, the ASX 300 gold miner's shares are down 30% to a 52-week low of 32.5 cents.

Why is this ASX 300 gold share being sold off?

Investors have been selling off this ASX 300 gold share today after the company released a production update.

According to the release, Tietto produced 11,191 ounces of gold at its Abujar operation in the Ivory Coast in August. This reflects the milling of more than 400,000 dry tonnes at an average grade of 0.90g/t of gold.

This resulted in the company finishing the month with a cash and bullion balance of $53.4 million, which is up $10 million month on month. However, it is prior to a scheduled debt repayment of US$6.25 million, which represents 25% of its Coris Bank facility.

So why the selling?

As positive as this may sound, it was well short of expectations.

In July, 11,643 ounces of gold was produced at Abujar and management was expecting things to ramp up from there. So much so, that it was guiding to calendar year second-half production of 105,000 ounces to 120,000 ounces of gold at an all-in sustaining cost (AISC) of US$875 to US$975 per ounce.

In light of this slower ramp-up, the ASX 300 gold share has downgraded its guidance to between 75,000 ounces to 85,000 ounces with an AISC of US$1,175 to US$1350 per ounce.

Management advised that this reflects grade control drilling results received over July and August, lack of stockpiles, and Tietto's updated reserve model.

The ASX 300 gold share's managing director and CEO, Matt Wilcox, remains positive. He said:

Detailed grade control results have confirmed a LOM update has resulted in the same amount of contained gold, but a 10% increase in tonnes mined. We have initiated a debottlenecking study with an aim to increase mill throughput by 15% to 5.5Mtpa, which would bring forward gold ounces and lower cash costs of production.

We will release a full LOM study by the end of September based on the current circuit, which we expect will result in average production of 172,000 oz gold over the first seven years of production at an expected all-in cost of approximately $1,100/oz, producing very strong annual free cashflows.

Motley Fool contributor James Mickleboro 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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