VANCOUVER (miningweekly.com) – Canadian gold producer Goldsource Mines has deferred its Phase 2 expansion plans at its Guyana-based flagship Eagle Mountain gold mine, to address issues with an underperforming plant and a water shortage.

The Vancouver-based company on Monday cut guidance from between 1 400 oz to 2 100 oz gold to between 600 oz and 800 oz, reflecting lower-than-expected throughput and recovery as well as unexpected equipment downtime and drought.

Goldsource has lowered average throughput to 500 t/d in November and 750 t/d in December, down from the previous guidance of 1 200 t/d in November and 1 500 t/d in December; its average net recovery to doré of 20% to 25% is down from budgeted net gold recovery of 25% to 30% for the second half of the year and the average head grade of 1.2 g/t gold, is down from the planned average head grade of 1.4 g/t gold.

Goldsource has deferred implementing a night shift aimed at lifting throughput to 1 500 g/t in December owing to the recovery issues and water-related throughput constraints.

Despite processing high-grade ore from Pit 4 averaging 1.21 g/t, which is up significantly from the 0.35 g/t gold  recorded in June and July, recovery from the Falcon concentrators dropped to an average of about 15% in September and an estimated 17% in October, short of the targeted estimated minimum recovery rate for economic viability of 30%.

In early October, Goldsource hired a qualified process engineer to optimise the plant at Eagle Mountain to improve throughput and recovery for the gravity-only operation. The most recent production results for the first week in November suggest that recovery has improved to an estimated 24% with further optimisation work ongoing.

Goldsource noted that critical equipment was currently being upgraded to reduce downtime and a new reservoir was expected to be on line in mid-November, which should address water availability.

On-site management is also testing the potential to improve throughput by liberating more gold from the oversize material, using a small crusher. The company is working closely with the designers of the Eagle Mountain plant, Sepro Mineral Systems, to understand and test the current plant recoveries of 20% to 25% that stack up against lab testwork showing optimised gravity recoveries of 50% to 60% - results achieved in the Eagle Mountain preliminary economic assessment.

As of November 14, Goldsource has C$686 000 in cash, including C$261 000 in restricted cash. The company advised that it is exploring financing alternatives to address working capital requirements and fund optimisation capital to increase throughput and recovery of the Eagle Mountain process plant.

The TSX-V-listed stock fell nearly 30% on the news on Monday to C$0.17 apiece.