PERTH (miningweekly.com) – The share price of gold miner Kingsgate Consolidated fell more than 6% on Friday as the company announced a A$300-million impairment on its Challenger gold mine, on the back of a revised mine plan.

In April this year, Kingsgate launched a review of its capital expenditure and operating costs in an effort to combat the falling gold price.

The miner told shareholders on Friday that the revised mine plan at Challenger, which resulted from the review, would see the operation focus solely on the higher-grade Challenger West orebody, which would result in a yearly production rate of between 70 000 oz and 80 000 oz.

The company would also focus on lowering costs at the Challenger operation, with the new mine plan expected to result in a 30% reduction in mine development costs.

A new mining contract would also materially lower mining costs from August 1, while fewer employees would be on site, owing to reduced underground development and the potential move to batch processing.

Challenger was expected to be cash flow positive within three months after the transition.

Kingsgate said an interim mine plan would be implemented for the balance of 2013/14 to facilitate the transition to the only conducting mining at Challenger West, which would provide the company with the time and flexibility to undertake a six-month drill programme to confirm the continuity of the Challenger West structure.

The new Challenger West operating plan and the current uncertainty in the metal price market would likely result in a significant change to the ore reserve estimate at the operation, Kingsgate said, adding that a new resource and reserve estimation was currently under way and would be completed within the next two months.

“Given the new life-of-mine, the operational changes at Challenger and the lower gold price environment, it is likely that a significant noncash impairment charge in the order of A$300-million will be made against the carrying value of Challenger, as part of Kingsgate’s 2012/13 financial accounts,” the company said.

It added that while there was still significant work to be completed at Challenger West, the mining and exploration results completed to date, have highlighted the potential of the orebody to support a more sustainable mining operation.

Kingsgate shares were trading at a low of A$1.24 a share on Friday, down from a high of A$1.36 a share.