Shares in the African gold miner Tietto Minerals
(ASX:TIE) experienced a significant drop of more than 25% on Tuesday, following the company's decision to revise downward its production forecast for the latter half of 2023 at the newly-operational Abujar mine in West Africa.
In a pre-market update, the mining company adjusted its gold production projection for July to December 2023, revising the estimates from an initial range of 105,000 to 120,000 ounces to a new forecast between 75,000 and 85,000 ounces. The initial projection had been presented at the Diggers and Dealers conference in Kalgoorlie earlier in August.
Consequently, the shares witnessed a decline to a low of 32 cents, representing a decrease of more than 27%. The stocks managed a slight recovery during afternoon trading but remained down by just over 20%.
Despite the negative news, Tietto Minerals opted to emphasize positive aspects by highlighting the recent production accomplishment at the Abujar mine. The company reported a gold production of 11,191 ounces in the last month, sourced from a significant volume of ore amounting to over 400,000 tonnes. The ore demonstrated an average gold grade of 0.90 grams per tonne.
Tietto attributed the downgrade to several factors, including the results from grade control drilling conducted in July and August, the absence of stockpiles, and adjustments made to the company's reserve model. This indicates that the Abujar mine's size and richness might not align with the initial expectations. However, Tietto affirmed that the mine's estimated operational lifespan of 11 years remains unchanged, though achieving it will require a 10% increase in annual ore processing.
Elaborating on the situation, Tietto clarified, "Detailed (gold) grade control results have confirmed a Life of Mine (LOM) update has resulted in the same amount of contained gold, but a 10% increase in tonnes mined."
The company unveiled plans to initiate a debottlenecking study aimed at boosting mill throughput by 15%, reaching an annual processing volume of 5.5 million tonnes of ore. This enhancement is projected to expedite gold production and decrease cash production costs. Tietto plans to release a comprehensive LOM study by the end of September, based on the current circuit configuration. The study's results are expected to reveal an average gold production of 172,000 ounces during the first seven years of production, with an anticipated all-in cost of approximately $1,100 per ounce, generating robust annual free cashflows.
"Tietto completed more than 15,000 meters of grade control drilling during July and August at a close spaced pattern of 12.5m x 6.25m. These results permit an accurate forecast of the four months of mining and production at Abujar from 1 September 2023 to 31 December 2023."
