Reed Resources, PMI join long list of gold battlers

Two more miners are feeling the squeeze in the state's gold sector, with Reed Resources and PMI Gold announcing plans to cut costs, reduce staff and defer project development spending.

Reed announced today that it would defer the second and third stages of its Meekatharra gold operation, as part of a wide-ranging raft of cost-saving initiatives.

The miner said it would not go ahead with its plans to further develop the mine until there was a sustained increase in the prevailing gold price.

Reed reported cash costs for the June quarter of $1,642 per ounce of gold, with an average sales price of $1,454/oz.

Stage one of mining operations at Meekatharra are ongoing, with production expected to reach 80,000oz over the 2013-14 financial year, Reed said.

"Reed has also initiated a series of cost reduction and risk mitigation measures to maximise cash generation and give operational flexibility over the remaining stage one ore sources," the company said in a statement.

The freeze on development spending at Meekatharra follows a series of operational setbacks at the mine, including failing to reach a production target and a reduction in the size of the mineral resource.

Also today, PMI Gold said it was seeking to reduce spending at its Obotan gold mine in Ghana as it continued to seek project development finance.

PMI's feasibility study for the Obotan mine was based on a gold price of $US1,300 per ounce, and cash operating costs of $US626/oz.

The miner is still awaiting final environmental approvals for the development, which it forecasts to produce more than 220,000oz per year.

PMI said while it awaited a financing deal its cost-savings measures would include slashing directors fees and salaries, staff cutbacks in its Ghanaian exploration team and a significant reduction in exploration expenditure.

Other moves include re-tendering all major contracts for the Obotan operation and a potential deferral of pre-stripping operations required for the early stage of the project's development.

"We have identified several key opportunities to reduce capital and operating expenses at Obotan which we believe will go a long way to offsetting the impacts of the lower gold price," PMI Gold chief executive Collin Ellison said in a statement.

"It is now well known that construction costs and other contracting expenses have fallen since commodity prices came off. This is particularly the case in west Africa, where project developments have slowed dramatically."

PMI said the cost savings measures would not hinder it moving ahead with the development of the Obotan project once a suitable financing deal is secured.

The miner maintained it was in a strong financial position with cash reserves of more than $US102 million.

Gold rose to $US1,292.90 a troy ounce on the Comex division of the New York Mercantile Exchange at close of trade Friday, while at 9:30AM, WST, PMI Gold shares were steady at 36 cents, and Reed Resources stock was also steady at 4.4 cents.