In Greek mythology Perseus was a demi-god who slayed Medusa, she with a face that turned men to stone. Now Perseus Mining’s stock is sinking like a stone. The company has lost more than a quarter of its market value in the first two hours of trading this morning.
At 1122 AEST Perseus shares were down 14.25 cents, or 21%, to 52.25 cents, after falling as much as 27% to 48.75 cents. The company said its Edikan gold mine in Ghana has experienced problems. This has resulted in lower daily gold production. Perseus’ gold production in the second half of its 2013 financial year will suffer.
The company had expected to produce between 105,000-125,000 ounces of gold in the six months to June 30. Now Perseus says it will produce less than 105,000 ounces. Moreover, all-in cash costs at its Ghana mine will exceed $US1100 an ounce. That’s bad news with the price of gold tanking.
Since reaching $US1790.40 an ounce on October 4 last year, the spot price of gold has plummeted 28% to $US1284.50, according to Bloomberg data. That’s not much above Perseus' all-in costs. Its total costs could be higher than that. Perseus’ shares have fallen 80% in the last 12 months.
The general manger of its Ghana mine, Wayne Nicoletto, has been stood down in the wake of the cost and production issues. The company’s chief operating officer, Jon Yelland, will become general manager of mine production. Perseus is also saying that it is cutting costs in Ghana and at its Perth headquarters. But it has yet to quantify those cost cuts.
The company is also launching a review of its mine operational cost structure and extraction processes. All this will not help the company unless the price of gold rises, particularly as Perseus’ Ghana mine seems a marginal proposition at best.