The Good, the Bad and the FutureI have now had time to digest the 3 news releases. I must say that I was somewhat surprised by the release of all three within a few hours of each other. I think they tried to sandwich the Bad (Haile problems and downgraded guidance) between the Good (enhanced Optimization) and the promising future (Exploration success)
Commissioning was supposed to take place by mid-2017. Now it is delayed until the end of the year. The failure (de-laminated liners) in the Carbon-in-Leach tanks is major. Replacement is under warranty, but replacement of lost production is not. One of eight tanks will be down until the end of the year. That is a 12.5% reduction in CIL capacity and likely the main cause of the 25% reduction in guidance. (Haile goes from 150-170 thousand ounces to 110-130 thousand ounces). That 40,000 reduction equates to about $50 million of lost revenue. As well, the $100 increase in Haile’s AISC is like a $12 million increase in costs. A $62 million lowering of expectations from Haile is likely the cause of the latest decline in the stock price.
The optimization results plus good possibilities of extending mine life at all four locations means that the longer-term outlook is promising. It is just that those good results have now been delayed for another 6 months.