The Brightstar Resources Ltd (ASX: BTR) share price is under pressure today after the company released a production update this morning.
At the time of writing, the emerging gold producer's shares are trading at 51 cents, down 9.73%.
So, what did Brightstar announce, and why are investors selling today?
Image source: Getty Images
What was announced this morning?
According to the release, Brightstar said it has finalised the numbers from its November processing campaign at the Laverton Mill.
The final result showed 4,652 ounces of gold produced and sold.
This was lower than earlier estimates, which were based on initial, unreconciled data. Now that the final numbers are in, the company has confirmed that the earlier figures were too high.
In-turn, this has led investors to hit the sell button as they were expecting more gold than was ultimately produced.
What caused the change?
Brightstar said the lower result was due to weaker gold recovery during the campaign. The final recovery came in at 75%, compared to the 83% that had been reported earlier.
The company said it has since identified the issue. According to management, processing conditions were not optimal, which meant less gold was recovered from the ore than expected.
Brightstar said this was partly due to changes in the type of ore being processed, which affected how well the gold could be recovered.
Why investors sold the stock
Production revisions like this often-hurt confidence, especially for miners still proving their processing performance.
Even though Brightstar says the issue has been identified, the November campaign still underperformed expectations, and that's what the market is reacting to today.
What matters going forward
Brightstar said it remains confident and expects gold recoveries to return to above 90% once processing conditions are adjusted.
The company pointed out that previous campaigns achieved recoveries above 90%, including 91.3% in August, and that its mines have historically performed well.
It also noted that mining operations remain on track, with solid output from the Fish mine in recent weeks.
CEO commentary
Brightstar's Managing Director, Alex Rovira, said:
Whilst this is an unfortunate set-back to the November processing campaign, all stakeholders remain confident that optimal conditions in future processing will see a material lift in recoveries in line with historical processing data.
Our mining operations continue to perform in-line with our production outlook, with Fish exceeding budget for production in tonnes, grade and ounces, while costs are lower than budget.
Foolish takeaway
This looks like the market reacting to lower final production numbers rather than a change in Brightstar's long-term plans.
The company believes the problem has been fixed, but investors will want to see that improvement show up in the next processing campaign. Until then, the share price may remain under pressure.
