Gold miner Reed Resources has announced a series of operational setbacks at its recently opened Meeekatharra operation, triggering a slump in its share price to a new closing low of 3.7 cents.
The company said it has produced 20,500 ounces of gold from its Bluebird open pit, which commenced production in January, missing its output target of 22,600 ounces.
The gold miner attributed the variance to backfilling from historical mining operations and mill tailings deposits that were not apparent in previous inspections.
Reed said the last 35 metres remaining to be mined of the legacy Bluebird pit contains rock back fill and hence it is not possible to verify the final pit survey.
The company estimates that this potentially cuts the Bluebird reserve by 4,200 ounces of gold.
Reed said it had reorganised operations at the Bluebird pit to mitigate the short term effects of reduced cash flow from the reduction in output.
Mining will now take place in two concurrent stages to access higher grade ore at the southern end of the pit.
The company said this will have a short term impact on ounces extraction but the open pit remains viable.
Reed also said the mine to mill ounces reconciliation for the Meekatharra gold operation had declined materially from previous levels and the company is assessing the reasons for this.
The news regarding the Meekatharra gold operation comes two days after the ASX requested an explanation from Reed regarding a drop in the price of the company’s securities from 5.4 cents to an intra-day low of 3.6 cents and an increase in volume of securities being traded.
Reed responded that the changes were due to a previously announcement where executive director Christopher Reed had entered into a commercial loan and share pledge agreement under which he had pledged Reed Resource shares as security for the loan facility.
The facility included the right to assign additional shares should the market value of the securities fall below certain ratios.
Reed exercised this right, assigning an additional 2.7 million shares in favour of the pledgee of the loan.
The company has stated that the pledgee was free to deal in the shares and that this may be the reason for the increase in volume of shares traded.
Reed's shares closed 1.2 cents lower at 3.7 cents today, after touching 3.5 cents during the day.