July 13, 2010 / 10:49 AM / 7 years ago

UPDATE 3-Alamos Gold Q2 output slips;project delay at main mine

* Q2 production 38,400 ounces vs 42,400 ounces yr ago

* Cash cost of $338/ounce in Q2

* Project at Mulatos mine behind schedule

* Shares down as much as 4 percent

(Recasts; updates share movement, adds analyst comments)

By Aftab Ahmed

BANGALORE, July 13 (Reuters) - Canada’s Alamos Gold Inc’s AGI.TO second quarter gold production fell about 9 percent, hurt partly by drought conditions, and a project at its primary mine has been delayed, sending its shares down as much as 4 percent.

The company said its $6.5 million new screening plant at Mulatos mine in Mexico is behind schedule and now expects it be completed in the fourth quarter of 2010.

Earlier the company expected the project to be completed by the third quarter.

The additional screening at the mine is expected to result in a 13 to 20 percent increase in crusher throughput, to offset the effects of declining mineral reserve grades.

TD Newcrest analyst Steven Green said the delay in the screening project will “have a modest effect”, but if they get the process in place, they can deal with the declining grade profile.

In the second-quarter the company produced 38,400 ounces of gold, compared with 42,400 ounces last year, as the drought conditions in late June forced the company to reduce the solution applied to extract gold, hurting production.

In the second quarter, the gold recovery ratio also fell by 3 percent to 60 percent.

The miner also said it incurred a cash cost of $338 an ounce in the second quarter.

The company’s first half production stood at 80,000 ounces, while it has a full year production forecast of 160,000 to 175,000 ounces of gold.

With the onset of the rainy season, the company said the third-quarter will see a rise in production.

Green expects the third quarter to be similar to the previous years on the assumption that grades will be slightly lower.

The company also expects to increase its gold recovery ratio to 68 percent in the second half of 2010.

Shares of the company were trading down 2 percent at C$14.94 on the Toronto Stock Exchange. Earlier it touched a low of C$14.67. (Reporting by Aftab Ahmed in Bangalore; Editing by Prem Udayabhanu, Jarshad Kakkrakandy) (aftab.ahmed@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: aftab.ahmed.reuters.com@reuters.net))

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