Sword of Damocles hangs over Mintails
PERTH (miningweekly.com) – The share price of South Africa-focused gold miner Mintails dropped by nearly 22% on Thursday on news that the company was failing to make its production targets.
Mintails told shareholders on Thursday that the company’s openpit operational performance had been impacted by the failure of the East Champ D’Or pit to yield expected production.
The lower yield resulted mainly from lower-than-expected ore grades, and Mintails noted that the company had encountered significant voids that had not been reflected in the historic plans. The unexpected availability of the reef led to an amendment of the East Champ D’Or mine plan, which would significantly reduce the expected production and mine-life of this pit.
Mintails has now suspended production from this pit, despite the fact that a bespoke compartment of the pit remained to be mined.
Production from all other active pits on the Kimberly Reef series has matched grade expectations, however, owing to lower average realised grade on the Kimberley Reef series, production from these pits would also remain sensitive to volume.
Furthermore, the underground operations at the D Shaft have not produced according to plan, with Mintails facing continued difficult ground conditions in establishing a second means of escape.
The miner said that these issues were now being resolved, and the company was in a position to ramp-up production to planned levels. While stoping has now started, Mintails would have to increase the number of underground staff to meet the budgeted production, and this process could take four to six weeks.
Adding insult to injury, Paige Limited, which has provided the company with crucial working capital funding in recent months, has indicated that it was unwilling to continue to lend money to Mintails unless clear changes to the mine’s operational plans could demonstrate a viable operation going forward.
Paige had extended some A$5-million in funding to Mintails, which has been fully drawn down.
Simultaneously, two contractors operating at the opencast pits have advised Mintails that they would be withdrawing their fleet from the mining area, until arrangements could be made to pay unpaid invoices.
This has resulted in Mintails subsidiary Cream Magenta 171 effectively calling in administrators.
Mintails told shareholders that the ability of the company to continue as a going concern remained dependent on the management team identifying a viable mining plant that would result in positive cash flow, as well as the continued support of creditors.
The company said that it was considering both the sale of non-core assets and a future capital raising to assist in its financial position.
Mintail shares traded at a low of 4c a share on Thursday.
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