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Why the Resolute share price crashed 11% lower today

James Mickleboro
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The Resolute Mining Limited (ASX: RSG) share price has come under significant pressure on Thursday.

In early afternoon trade the gold miner’s shares as down a disappointing 11% to $1.27.

Why is the Resolute share price crashing lower today?

Investors have been heading to the exits in their droves on Thursday after the company reported issues at its Syama Gold Mine in Mali.

According to the release, Resolute has taken its roaster offline after detecting a crack in the main external shell. The roaster is a key component of the sulphide processing circuit at the Syama Gold Mine.

Earlier this week Resolute advised that maintenance and repair work was completed to the sulphide crusher apron feeder and roaster refractory lining during September.

And while the roaster was successfully brought back into service following this work, upon reheating and under normal operational loads, the company has observed a crack in the external shell of the roaster. It advised that this was unrelated to the maintenance and repair work.

Resolute is now cooling down the roaster to assess the full extent of the issue and identify the remedial action required.

Unfortunately, management believes the repair to the crack may have a material impact on production from the Syama sulphide circuit for the December quarter.

Once investigations are complete and a repair plan has been established, a further update on the activities and the impact of this roaster shutdown for FY 2019 will be provided.

What now?

Whilst this is disappointing news, I am a little surprised by the extent of its decline. After all, in the September quarter the Syama sulphide circuit accounted for only 12,730 ounces of its total production of 103,201 ounces. 

This could arguably make today’s share price weakness a buying opportunity. Though, it may be prudent to wait until the full extent of the damage and downtime is known.

In light of this, gold miners such as Northern Star Resources Ltd (ASX: NST) and St Barbara Ltd (ASX: SBM) could be good alternatives if you’re looking for exposure to the precious metal right now.

The post Why the Resolute share price crashed 11% lower today appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019