Alacer joins the rush for the exit
The purge of Australia's marginal goldmines is gathering pace, with Alacer Gold joining the list of companies seeking to sell their local assets.
Just months after naming the carbon tax among several factors that were pushing up costs and stifling profits, Alacer confirmed on Thursday that it would seek to leave the Australian industry and focus on its lower-cost mine in Turkey.
Alacer's two mines near Kalgoorlie were already considered among the more expensive in Australia before costs blew out in the March quarter by a further $US187 per ounce at the Higginsville mine, and $US274 per ounce at the South Kalgoorlie mine.
The problems were exacerbated by the significant drop in the gold price in April.
While the carbon tax was named as a factor that had pushed up power costs by $US31 per ounce, Alacer also said costs had risen as it mined lower grade ores, geology costs were higher, and rainfall had disrupted operations.
Alacer president David Quinlivan said a sale process for the Australian mines had begun, but the timing of any deal remained uncertain.
"Alacer has recently received confidential, non-binding expressions of interest from several parties," he said.
Alacer recently wrote down the value of its Australian mines, but despite that Credit Suisse analysts Michael Slifirski and Sam Webb wrote that any sale was unlikely to fetch the new book values of $370 million for Higginsville and $210 million for South Kalgoorlie.
"A further material reported loss can be expected when a sale is executed," the analysts wrote.
A successful sell-off would render redundant the 2010 merger of Avoca Resources and Anatolia Minerals, through which Alacer was formed.
Analysts were unimpressed when the merger was announced in September 2010, noting there would be few synergies achieved by merging a company with Australian assets with a company with Turkish assets.
The merged stock first traded on the ASX in February 2011 at $7.31 and reached a high of $11.35 in November 2011. It has been declining ever since, hitting a low of $2.09 in recent weeks.
Alacer's move continues a bad week for the local gold sector, with Focus Minerals reportedly cutting scores of jobs near Coolgardie, and Newcrest cutting more than 100 jobs and closing its Brisbane office.