Gascoyne halts mining at Dalgaranga

Gascoyne Resources has suspended mining at its Murchison flagship and will begin demobilising its workforce at the site after succumbing to ballooning costs and labour shortages.

The West Perth-based gold miner told the market its board had determined production at Dalgaranga was not sustainable and would be put on care and maintenance in the next two to three weeks.

Gascoyne had less than two quarters of available funding left in the September quarter, pointing to what it deemed "unacceptably high" unit costs and a marked drop in production. 

Gold output fell from 16,882 ounces in the June quarter to 13,905 ounces in September due to heavy rainfall and difficulty accessing skilled labour, issues Gascoyne said today had continued.

"These factors have continued through October and into November, leading to reduced production levels, higher production costs and negative cash-flow from operations, which the Board has determined is not sustainable," it said. 

"Furthermore, it is clear that despite the significant potential of the Company’s assets such as Yalgoo, Gilbey’s North and Never Never, the transition to mining this higher-grade ore is not affordable and cannot be optimised at the current time given Gascoyne’s liquidity position."

Gascoyne’s workforce stationed at Dalgaranga will be demobilised over the next one to two days.

Discussions with contractors and creditors are underway, according to Gascoyne, in a bid to keep Dalgaranga on care and maintenance in the medium term. 

Chief executive and managing director Simon Lawson said it was 'extremely sad to have to say goodbye to so many good people'.

“It is very disappointing to have to make this decision, particularly in light of all the hard work the exceptional team at Dalgaranga has put in over the past couple of years," he said. 

"The continued pressure of industry-wide cost inflation, approval delays and subpar operational performance have contributed to the Board and I uniting in the view that continuing to operate in these challenging times is extremely high risk."

Mr Lawson said the decision was heavily influenced by a recent gold discovery neighbouring Dalgaranga. 

"However, the timelines involved in properly drilling out and developing this exceptional discovery, together with the ongoing productivity, equipment availability and people shortage issues experienced by the mining contractor, mean that it is simply a more prudent and sensible step to pause mining and processing, step back and recast our operations on a much more sustainable basis," he said. 

He added that Gascoyne would be working hard over the coming months to establish a solid financial platform for the business. 

“It is extremely sad to have to say goodbye to so many good people who have worked so hard on behalf of the Company to this point. Our HR team and Employee Assistance Provider will be providing support and assistance to those affected at this difficult time."