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AuRico Gold (AUQ) Slammed Following Ocampo Update; Sees Lower Production, Higher CapEx

September 5, 2012 11:47 AM EDT Send to a Friend
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AuRico Gold (NYSE: AUQ) is getting slammed Wednesday following an update provided by the miner for its Ocampo Mine site in Mexico.

Shares are over 19 percent lower on the session.

According to the release:

"As previously reported on July 16, 2012, production in the second quarter of 2012 was negatively impacted by an unusually high turnover of skilled labour that significantly reduced underground ore development in the Northeast underground mine. As a result the Company is currently mobilizing two underground mining contractors to support an accelerated underground development program. As part of this initiative, management conducted an operational review focused on implementing a sustainable production growth plan that will result in consistent mine performance.

While early indications from the accelerated development initiatives demonstrate improvement, the Company has adopted a more conservative view with respect to operational estimates for 2012 and 2013. Accompanying this new production forecast, the cash cost profile is expected to increase in the short term reflecting reduced proportional levels of low-cost underground production and a corresponding increase in the level of higher-cost open pit production. As the mine increases the level of low-cost underground production in 2013 and beyond, the cost per ounce profile is expected to reduce significantly.

Capital expenditure estimates have been increased for 2012 and 2013, reflecting the accelerated development work being carried out. This development work is contained within existing life of mine development requirements and is being brought forward to increase developed underground inventory for production to ensure flexibility and reliability of future operations. In addition, reserves originally planned to be mined in 2012 and 2013 have been pushed out into subsequent production periods and the mineral reserve and resource estimate at Ocampo has not changed."

For 2012, AuRico sees production at Ocampo in the range of 115,000 to 125,000 Aue ounces, from 150,000 to 170,000 prior. CapEx at the project moves from $50 million to a $70 million cap.




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