June 14, 2013 03:49 pm
Alacer looks to shed Australian mines
There are knocks on the door for Alacer Gold’s (ASR-T) Australian assets and the company says it is listening.
While no financial details were given on any possible deals, the prospect of selling its higher cost mines had the company’s stock climbing. In Toronto on June 13, Alacer shares were up 12%, or 27¢, to $2.58 on 2.37 million shares traded.
If a deal with any one of the “several” interested parties is put together, Alacer will shed its two highest cost mines and gain a singular focus on its lower cost and flagship project, the Copler Mine in Turkey.
Alacer’s portfolio is currently made up of an 80% interest in Copler, along with a full interest in the Higginsville and South Kalgoorlie gold mines in Australia.
Its interest in selling off the assets continues a trend that began in early April when it sold its 49% stake in Frog’s Leg, another Western Australian gold project.
Alacer sold its stake in Frog’s Leg mine its joint venture partner at the site, La Mancha Resources (LMA-T), for $144 million. The company showed it was in-tune with investors increasing insistence on cash distributions by pushing US$70 million of that money back out to shareholders through a special dividend. It also managed to strengthen its balance sheet by putting $51 million towards repaying debt.
Valuing Higginsville and South Kalgoorlie will likely be a more complex and lengthy process, since there isn’t a joint venture partner to sell to. Also, it is no secret that the two mines were the chief reason that Alacer missed earnings expectations for the first quarter of this year, due to lower-than-expected production and higher cash costs at the mine.
Company wide Alacer sold 93,000 oz. of gold for the quarter at cash costs of US$932 per oz.
Higginsville, which sits 125-km south of Kalgoorlie within the Eastern Goldfields of Western Australia, was responsible for 28, 213 oz. of production. And while that was in-line with its production guidance, mining costs were up US$187 per oz. due to expenses related to accessing higher grade ore bodies at the Trident and Chalice deposits, as well as rising energy costs. Alacer says power costs rose $31 per oz year-over-year due to more electricity being used, higher electricity costs, higher diesel costs and the introduction of a carbon tax in Australia.
Alacer expects total cash costs at the mine to be between US$1,125 and $1,240 per oz. for the year.
South Kalgoorlie, which sits 15-km south of Kalgoorlie, also saw costs rise. This time the increase was to the tune of $274 per oz. with the chief culprit being the heavy rains of February in March. For the quarter, the mine turned out 4,836 oz. of gold.
Helping out the bottom line at South Kalgoorlie for the next year will be cash paid to the company by La Mancha for the toll treatment of ore from Frog’s Leg. But that extra cashflow doesn’t mask the relatively high cash costs at the mine, which are expected to come in between US$1,210 and $1,330 per oz. for the year.
Last year Higginsville produced 137,000 oz. of gold, while South Kalgoorlie produced 40,000 oz. In comparison, Copler in Turkey produced 151,000 oz. last year and is expected to turn out between 162,000 and 178,000 oz. this year at cash operating costs of between US$340 to US$375 per oz.
Alacer say it expects to produce a total of 330,000 to 365,000 oz. of gold this year with average cash costs expected to be in the US$675–749 per oz. range.