ASX 300 gold miner sinks 10% after gold price crash overshadows strong quarter and sparks selloff

The crashing gold price is weighing on the industry today.

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Key points

  • A gold miner reports record quarterly production and sales, with improvements in processing and reduced costs despite challenging weather conditions.
  • The company strengthens its cash position amid a high average gold price, offsetting significant investment in capital projects and exploration.
  • Management highlights the strategic benefits of expanding production capabilities and underscores ongoing exploration successes.

Ora Banda Mining Ltd (ASX: OBM) shares are sinking on Wednesday morning.

At the time of writing, the ASX 300 gold share is down 10% to $1.23..

What's going on with this ASX 300 gold share?

Investors have been selling the gold miner's shares today after its quarterly update was overshadowed by a sharp decline in the gold price overnight.

It isn't just Ord Banda shares that are falling today. The S&P/ASX All Ords Gold index is currently down a sizeable 9.5%.

In respect to its quarterly update, the ASX 300 gold share had a strong three months thanks to an increased contribution from Sand King and improvements in processing performance.

The ASX 300 gold share reported a 39% increase in gold production to 30,595 ounces. This means that the company achieved record production despite facing numerous weather events which led to road closures and power outages.

It also revealed record gold sales for the quarter from the Davyhurst processing plant of 27,772 ounces. This represents a 37% increase on the previous quarter. In addition, attributed ounces from third-party milling in the quarter totalled 3,564 ounces, resulting in total equivalent gold sold of 31,336 ounces.

This was achieved with an all-in sustaining cost (AISC) of A$2,872 per ounce, which is an impressive 20% reduction on the previous quarter.

Thanks to the strong gold price, which averaged A$5,390 an ounce, and its lower costs, Ora Banda strengthened its cash position during the quarter. It increased by $38.5 million over the three months to $122.7 million. This was achieved while investing $49.5 million in capital projects, resource development, and exploration.

Commenting on the quarter, the ASX 300 gold share's managing director, Luke Creagh, said:

This record quarter, driven by the ramp up of our second underground mine at Sand King, reflects the hard work by the team and demonstrates Ora Banda's ability to find and develop mines, with Sand King achieving payback 12 months after establishing the portal. This record quarter highlights the substantial benefits of a second underground mine in the production profile, delivering a production increase of 39% and record cash flows of $38.5 million.

These cash flows were generated despite the Company investing $49.5 million in capital, resource development and exploration, and $7.4 million in Put Options for downside gold price protection on future production. Ora Banda's strategy of organically growing production and extending mine life is gaining momentum as we continue to achieve outstanding drill results on key prospects at Waihi, Little Gem and Round Dam, all of which have significant drill programs currently underway.

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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