PERTH (miningweekly.com) – Metals miner MMG will cease gold operations at its Sepon mine, in Laos, in December, owing to the depletion of ore reserves and lower margins.

Singapore-listed MMG said on Monday that it would place its gold plant on care and maintenance, while the Sepon operation would focus solely on copper production.

“The decision to cease gold operations at Sepon is necessary to preserve the strong contribution of the Sepon business,” said CEO Andrew Michelmore.

“Sepon gold oxide reserves have been depleting for some time now, with previous forecasts that production would cease in 2011. The combination of a higher strip ratio and weaker gold price is driving increased production costs,” he said.

Michelmore pointed out that it was no longer economic for MMG to produce gold at Sepon.

Since the start of operations in December 2002, the Sepon gold operation has produced over 1.2-million ounces of gold. The copper operation, in turn, delivers some 80 000 t/y of copper cathode.

Despite some shared fixed costs between copper and gold production, the C1 cost of producing gold has doubled since last year to $1 880/oz in the first half 2013, while the gold price at the end of the first half was about $1 198/oz.

Michelmore said MMG would have to review the overall structure of the operation to meet future needs of the business. This would result in a change to resourcing requirements, which the company would work through over the coming months.

“MMG acknowledges that this is disappointing news for our workforce. We are committed to working closely with our people, communities, suppliers and the Lao government to make the transition as smooth as possible,” said Michelmore.

Sepon would continue exploration activity for gold oxide and primary gold in Laos and review the recommencement of gold production when value can be created for shareholders.