PERTH (miningweekly.com) – The board of gold miner Gascoyne Resources has launched a review of the company’s operating strategy, suspending operations at its Dalgaranga project, in Western Australia, immediately.

The ASX-listed miner said that the 2.5-million-tonne-a-year Dalgaranga mill will be transitioned to operating on a care-and-maintenance basis over the next two to three weeks and would be maintained in a state of readiness for rapid resumption of production.

The majority of the workforce currently at the mine will be demobilised over the next one to two weeks.

Gascoyne in its September quarterly report flagged that gold production at Dalgaranga had been negatively impacted by abnormally high rainfall, labour shortages and impacts from the Covid-19 pandemic.

The miner on Tuesday said these impacts had continued through October and November, leading to reduced production levels, higher production costs and negative cash-flow from operations, which the board had determined was not sustainable. Furthermore, it was clear that despite the significant potential of the company’s assets, such as Yalgoo, Gilbey’s North and Never Never, the transition to mining this higher-grade ore was not affordable and could be optimised at the current time given Gascoyne’s liquidity position.

“It is very disappointing to have to make this decision, particularly in light of all the hard work the exceptional team at Dalgaranga has put in over the past couple of years. The continued pressure of industry-wide cost inflation, approval delays and sub-par operational performance have contributed to the board and I uniting in the view that continuing to operate in these challenging times is extremely high risk,” said MD and CEO Simon Lawson.

“We are committed to developing a sustainable five-plus-year solid mine plan targeting higher margin production and we strongly believe that this focus is in the best interests of the company and our shareholders.

“The foundation of our decision is heavily influenced by the phenomenal near-mine exploration success Gascoyne has enjoyed in recent months, making what is arguably Australia’s best new high-grade gold discovery right on the doorstep of the current operation. However, the timelines involved in properly drilling out and developing this exceptional discovery, together with the ongoing productivity, equipment availability and people shortage issues experienced by the mining contractor, mean that it is simply a more prudent and sensible step to pause mining and processing, step back and recast our operations on a much more sustainable basis,” said Lawson.

Discussions have commenced with the Gascoyne’s contractors and creditors to allow the company to restructure its financial position to enable Dalgaranga to remain on care and maintenance in the medium term. During this period, the company’s management team will work with its advisers and key stakeholders to develop a new strategic operating plan and implement a financial restructure.

A key part of this will be to pivot to an exploration/resource growth focus in the short term while preserving the value of the existing assets and securing additional strategic funding to complete the drill-out of the near-surface high-grade Never Never and Gilbey’s North discoveries, establish an underground portal and exploration decline from Gilbey’s pit towards Never Never, evaluate and progress other near-mine surface opportunities, and progress the approval of the mining lease and complete the feasibility studies on the 244 000 oz Melville gold project.

Lawson said that preparation of the new strategic operating plan, including a new mine plan, and implementing a financial restructure is expected to take several months to complete.

“We will be working very hard over the coming months as we establish a solid financial platform to support growth and reserve drilling to build an operating plan with firm foundations and optionality to deliver sustainable production from our debt-free processing plant for many years to come,” he added.