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Investing.com -- Hochschild Mining (LON:HOCM) shares tumbled more than 19% Tuesday after the company suspended operations at its Mara Rosa mine in Brazil for six weeks, citing ongoing technical and weather-related issues that have forced a sharp cut to full-year production guidance.
The company said it would temporarily halt the processing plant to conduct general maintenance and repair mechanical issues with the filter system.
Mining activity will continue during the suspension to allow waste stripping operations to progress, according to a note from RBC Capital Markets.
The production halt follows delays in accessing higher-grade ore due to heavy rainfall and contractor performance issues flagged in the first quarter.
These issues have also disrupted the tailings filter process, where material from the processing plant is dried for dry stack deposition.
As of May, Mara Rosa had produced 25,000 ounces of gold, about one-quarter of its original annual guidance.
The company had previously guided production at the site between 94,000 and 104,000 ounces for the year.
RBC now estimates production will fall to about 71,000 ounces, a 24% drop from the market consensus of 93,000 ounces.
The revised forecast brings Hochschild’s expected total group production for the year to 337,000 ounces, below the lower end of the company’s guidance range of 340,000 to 375,000 ounces, RBC said.
The changes follow the recent resignation of chief operating Rodrigo Nunez. RBC said this makes a production recovery in the second half of the year more challenging.
Cost estimates have also been affected. Hochschild had set an all-in sustaining cost range at Mara Rosa of $1,287 to $1,370 per ounce. RBC’s internal estimate stands at $1,373, with broader market estimates at $1,428.
At a consensus gold price of $2,575 per ounce, including hedging, and assuming a cash cost of $1,428, RBC calculates the downgrade in production would reduce full-year earnings before interest, taxes, depreciation and amortization by $25 million. That represents about 4% of current consensus forecasts.
Operations at the company’s other mines, Inmaculada and San Jose, remain in line with guidance.