[miningmx.com] – SHARES in Great Basin Gold plummeted 45% as the
market absorbed the news it was in emergency talks with lenders in an effort to
avoid insolvency. The stock was last trading at C$0.35c/share on the Toronto Stock
Exchange and some 37% weaker on the JSE at a mere R2.61/share.
As a result of Great Basin’s parlous position, its directors – interim CEO, Lou van
Vuuren and chairman Ron Thiessen – declined to take any measures off the table
that would save the company, including its outright sale.
“The process we are going through has been underway for weeks, even months. We
could sell either of our assets, or both, as well as the entire company,” said Van
Vuuren. He was commenting in response to questions following the presentation of
Great Basin’s June quarter operating and financial results, in which it posted a 43%
decline in revenue and a 5 Canadian cents/share loss.
The company also said in its presentation that CEO Ferdi Dippenaar, who had led the
company for seven years, had resigned. A board committee had been assembled to
decide how to guide the firm through its liquidity crunch, which RBC Capital Markets
analyst, Jonathan Guy, said required US$60m in short-term funding.
Total debt, which consists of a C$102m convertible loan, and two term facilities of
C$147m and C$43m each, is C$293m and has a June 2012 settlement total of
C$318m. This is set against Great Basin Gold’s current market capitalisation of
C$129.8m.
“This is an unfortunate situation that we find ourselves in, but we have to find a way
through this,” said Van Vuuren, who added that in terms of the assets review they
may not be in the same structure or same legal entity.
Great Basin estimates that its two assets – the Burnstone mine in South Africa’s
Mpumalanga province and Nevada’s Hollister mine – have carrying values on Great
Basin’s books of C$630m and C$150m respectively.
However, Van Vuuren said that the market value of Burnstone might be “north of”
C$200m to C$300m. In either case, the assets are valued higher internally than the
market values the whole company. Raising further debt was “quite challenging”, said
Van Vuuren.
Van Vuuren said costs would be reined in at the company, including off-mine costs,
and urgent discussions were underway with lenders that could take mere days to
conclude, given the company’s situation.
Discussions with South Africa’s Investec regarding the restructuring of a loan with
Tranter Gold, Great Basin Gold’s empowerment partner on the Burnstone mine, had
been suspended in the wake of Dippenaar’s resignation and the liquidity crisis at the
company.
Van Vuuren said getting Hollister to annualised production of between 80,000 oz to
100,000 oz was critical to Great Basin while improvements at Burnstone would be
pursued, although he cautioned shareholders not to expect visible improvements in
the current (September) quarter.
“Nothing is off the table, including divestitures,” said a downbeat Thiessen, who had
had a major hand in the formation of Great Basin when it was created out of the
Hunter Dickinson stable.
