Emerald Resources NL (ASX: EMR) shares are having a tough finish to the week.
In morning trade, the ASX 200 gold stock has crashed over 8% to $3.81.
Why is this ASX 200 gold stock sinking?
Investors have been hitting the sell button this morning after the company released a production update for the Okvau Gold Mine.
The Okvau Gold Project is the ASX 200 gold stock's flagship project in Cambodia. In FY 2024, the company achieved its production guidance of 114,000 ounces of gold.
Unfortunately, things haven't been as positive in the second half of FY 2025.
According to the release, Okvau Gold Mine gold production for the third quarter of FY 2025 is anticipated to be around 20,000 ounces.
This compares unfavourably to its quarterly guidance for production of 25,000 ounces to 30,000 ounces.
Management notes that its quarterly production is below guidance due to earthworks and waste movements related to cut back activities limited access for earth moving equipment. These activities also restricted access to ore during the latter parts of the quarter.
In addition, areas accessed within the pit during the quarter uncharacteristically underperformed compared to reserve.
Its all-in sustaining cost (AISC) for the third quarter is anticipated to be within 20% of its guidance range of US$1,100 per ounce to US$1,200 per ounce.
In light of this, the company now expects gold production of 105,000 ounces to 115,000 ounces at AISC of US$900 per ounce to US$1,000 per ounce.
Management commentary
The ASX 200 gold stock's managing director, Morgan Hart, believes this short term pain is worth it for the potential long term gains. Hart said:
Although the earthworks and waste movements related to the cut back activities hampered production during the current Quarter, the cut back is designed to allow for the extended life of the open-cut operations and to facilitate early access to an underground portal. Further with these mining activities, it is expected that the next three quarters of production to be at the upper end of guidance.
The managing director also stressed that the uncharacteristic underperformance of the reserve is an anomaly and not a trend. He said:
We note that the forward-looking grade control indicates that the uncharacteristic underperformance of the reserve in the areas accessed during the Quarter is an anomaly and not a trend. With all resources, variations are expected in isolated areas of the pit and to date the Okvau pit, with its grade and tonnage distribution, has allowed for variations in the schedule to mitigate any underperformance. However with the commencement of the cut back, it has limited the Company's ability in this regard.
Pleasingly recovery for the Quarter is expected to be ~85% despite a lower processed head grade which confirms then step change in plant performance as highlighted during the previous quarter.
