The Red 5 Limited (ASX: RED) share price is cratering today. Red 5 shares are down a staggering 35.22% at the time of writing to 22 cents a share after closing yesterday at 34 cents a share.
Red 5 is an ASX gold miner that operates the Darlot and King of the Hills gold mines in the Eastern Goldfields region of Western Australia. Today's share price move will be very disappointing for the company, considering it was just included in the All Ordinaries Index (ASX: XAO) 2 days ago. The drop puts Red 5 towards the bottom of the company's 52-week range of 16–40 cents per share.
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Why the Red 5 share price is tanking today
The catalyst for this dramatic share price move appears to be an ASX release that the company put out before market open this morning. In this release, Red 5 management listed a number of concerns investors are clearly reacting to today.
Firstly, the company is planning to "scale down" underground ore production at its King of the Hills mine over the second half of 2020 in order to commence open pit ming at its recently acquired Great Western project.
Secondly, Red 5 is reporting that it is expecting substantially reduced gold production from its Darlot mine in the quarter ending 30 June 2020 due to malfunctioning equipment and higher dilution of gold ore than was originally expected. According to the release:
A recent crusher breakdown has resulted in lost production of ~3,200oz which, together with lower than forecast average mining grades as a result of dilution, has resulted in production for the June 2020 Quarter of ~21,000 oz (compared with guidance of 26,000 – 30,000 oz). FY20 production is expected to be ~93,000 oz (compared with guidance of 98,000 – 102,000 oz).
The company reports that as of June 2020, the mine is back to full production capacity.
Red 5 managing director mark Williams had this to say about the release today:
While we are disappointed that Darlot production has again been impacted in the short term due to the issues outlined in this release, we are confident that the measures implemented will stabilise production and improve predictability to put us on track to achieve our FY21 forecast.
This FY21 forecast is an expected 90,000–98,000 ounces of gold at an all-in sustaining cost of $1,830–$2,030 an ounce. At the time of writing, the gold price is $2,552.50 in Australian dollars, or US$1,772.
