West African gold producer Avesoro Resources has revised donwward its production guidance for this year to between 180 000 oz and 200 000 oz, compared with previous guidance of between 210 000 oz and 230 000 oz.
CEO Serhan Umurhan noted in a statement issued on Monday that the company had, during the first and second quarters, experienced significant ore dilution at the Youga gold mine, in Liberia.
Following a comprehensive cost review, the company had implemented an initiative to transition Youga, as well as its New Liberty gold mine, in Liberia, to contractor mining to further reduce the mining costs at both mines, while increasing mining volumes.
As part of this initiative, the company experienced a temporary reduction in operating performance, as well as associated inefficiencies at both assets.
At Youga, this has resulted in the openpit mining fleet operators refusing to work. Should the situation not be resolved on or before June 12, Avesoro will temporarily suspend gold production at the operation.
Negotiations are ongoing and Umurhan is optimistic that a mutually acceptable resolution will be found in the near future.
Assuming the stoppage in mining operations at Youga is resolved quickly, the company expects a funding shortfall of between $25-million and $30-million later this year.
Further, the planned transition to contractor mining at New Liberty also resulted in disruption to mining activities and gold production, with production having materially deviated from budget in April and May.
“I expect the downside of this initiative to be short-lived and that the anticipated reduction in mining costs will be beneficial to the company over the longer term,” said Umurhan.
“I am confident that these short-term challenges will be quickly overcome, and the company’s focus remains firmly on delivering production from both mines in line with the forecasts within the technical reports while delivering a successful transition to underground mining operations at New Liberty within the next two years.”
Although a number of cost saving initiatives are being implemented and mining unit costs are decreasing on a per tonne basis, operating cash costs are expected to increase to between $889/oz and $960/oz, compared with the previously forecast $850/oz to $910/oz.
All-in sustaining costs are likely to increase to between $1 152/oz and $1 248/oz sold, compared with the previously forecast $1 110/oz to $1 190/oz.
A special committee, comprising three independent nonexecutive directors, has been formed to oversee the operational performance at the company’s mines and to consider various financing options available to the company.