- Gold producer Dacian Gold (DCN) may be making investors nervous with its latest quarterly report
- Production was down and costs were up over the December quarter, but still fall in line with the company’s guidance
- However, a hefty $25 million debt repayment due in March means Dacian will have some heavy costs for the current quarter
- While cash reserves and future earnings should be enough to keep Dacian afloat, the company has little room for error over the coming quarters
- Dacian entered a voluntary trading halt this morning, meaning it’s uncertain how the market will react to today’s news
- Shares in the company closed on Friday afternoon at $1.40 each
Up-and-coming gold producer Dacian Gold (DCN) is meeting production guidance for the year but perhaps leaving breathing room a little tight.
In its latest quarterly report for the three months leading up to the end of December, Dacian told shareholders it produced roughly 33,000 ounces of gold.
While this is down on the previous quarter’s 42,000 ounces, the total 75,000 still falls in the upper range of Dacian’s guidance for the first half of the 2020 financial year.
The company blamed a lower average mill feed grade for the decreased production compared to the September quarter.
Though Dacian processed a record 776,000 tonnes of ore in December, the average feed grade was 1.5 grams per tonne of gold for roughly 36,000 contained ounces.
Further, all-in-sustaining-costs (AISC) for Dacian’s Mount Morgans Gold Operation were $1737 per ounce. Costs were higher than September quarter’s $1423 per ounce AISC, but the average for the half-year once again fell within the company’s expectations.
However, the annual cost guidance for the 2020 financial year is between $1400 and $1500, meaning Dacian will have to work at cutting AISC over the next six months to meet expectations.
Taking a look at the company’s financials, Dacian burned over $10 million cash over the December quarter. While the company remains cash-flow positive for the 2020 financial year so far, Dacian’s $59.9 million in customer receipts over the quarter was outweighed by its $70.3 million in operating costs.
For the half-year, Dacian is up $9.9 million in operating cash flow. The company had $43 million cash on hand at the end of the December quarter.
However, Dacian made no debt repayments over the quarter. With the company owing $94.7 million to debtors, investors may be worried the company is leaving little margin for error over the coming quarters.
Dacian has a hefty $24.7 million debt repayment due in March going hand-in-hand with some higher operating costs, bringing expected cash outflows for the next quarter to over $100 million.
The company’s cash reserves combined with its expected earnings should be enough to meet these costs without the help of another capital raise, but any unexpected costs or hindrances to operations could leave Dacian in trouble.
Of course, provided the next two quarters track along without a hitch, it will leave the company in a strong position for the next financial year.
However, Dacian entered a voluntary trading halt before shares got a chance to move this morning, so it’s not yet sure how the market will react to today’s quarterly report.
Dacian shares closed on Friday at $1.40 each. The company has a $319.8 million market cap.