Alacer looks to shed Australian mines

There are knocks on the door for Alacer Gold’s (ASR-T) Australian assets, and the company is listening. 

While no financial details were given on any possible deals, the prospect of selling its higher-cost mines had the company’s stock climbing. On June 13, Alacer shares were up 12% — or 27¢ to $2.58 — on 2.37 million shares traded. 

If a deal with any one of the “several” interested parties happens, Alacer will shed its two highest-cost mines and focus on its lower-cost and flagship project, the Copler mine in Turkey.

Alacer’s portfolio is made up of an 80% interest in Copler, along with full interest in the Higginsville and South Kalgoorlie gold mines in Australia.

Its interest in selling off the assets continues a trend that began in early April, when it sold its 49% stake in Frog’s Leg, another Western Australian gold project. 

Alacer sold its stake in Frog’s Leg mine to its joint-venture partner at the site — La Mancha Resources (LMA-T) — for $144 million. The company showed it was in tune with investors’ increasing insistence on cash distributions by pushing US$70 million back out to shareholders using a special dividend. It also strengthened its balance sheet by repaying $51 million in debt. 

Valuing Higginsville and South Kalgoorlie will likely be more complex and lengthy, since there isn’t a joint-venture partner to sell to. And it’s no secret that the two mines were the main reasons that Alacer missed earnings expectations for this year’s first quarter due to lower-than-expected production and higher cash costs at the mine. 

Company-wide, Alacer sold 93,000 oz. gold for the quarter at cash costs of US$932 per oz.

Higginsville, which sits 125 km south of Kalgoorlie within the Eastern Goldfields of Western Australia, was responsible for 28,213 oz. of that production. And while this is just in line with its production guidance, mining costs were up US$187 per oz. due to expenses related to accessing higher-grade orebodies at the Trident and Chalice deposits, and rising energy costs. Alacer says power costs rose $31 per oz. year-over-year due to more electricity being used, higher electricity costs, higher diesel costs and a carbon tax introduced in Australia. 

Alacer expects total cash costs at the mine between US$1,125 and US$1,240 per oz. for the year. 

South Kalgoorlie, which sits 15 km south of Kalgoorlie, also saw costs rise. This time the increase was to the tune of US$274 per oz., with the main culprit being the heavy rains in March. For the quarter the mine turned out 4,836 oz. gold. 

Next year, South Kalgoorlie’s bottom line will benefit from cash paid to the company by La Mancha for toll treating Frog’s Leg. But that extra cash flow doesn’t mask the relatively high cash costs at the mine, which are expected to come in between US$1,210 and US$1,330 per oz. for the year. 

Last year Higginsville produced 137,000 oz. gold while South Kalgoorlie produced 40,000 oz. In comparison, Copler in Turkey produced 151,000 oz. last year and is expected to turn out between 162,000 and 178,000 oz. this year, at cash operating costs between US$340 and US$375 per oz. 

Alacer expects to produce 330,000 to 365,000 oz. gold this year, with cash costs between US$675 and US$749 per oz.