[miningmx.com] – FERDI Dippenaar, CEO of gold junior Great Basin
Gold since 2005, has resigned from the company amid signs the US and South
African-based firm needs another $60m to finance the business.
“Whilst the resignation of the CEO is not a surprise we do not believe that it will be
sufficient to restore shareholder confidence at this point,” said Jonathan Guy, an
analyst for RBC Capital Markets (which has subscribed for Great Basin shares in the
past) in a note today in the wake of the announcement.
Shares in the company slid 7.95% on August 14 in the US ending the day at 45 US
cents/share, compared to $2.23/share just over a year ago. The slide in the
company’s value makes a further share issue unlikely with the possible sale of its
Hollister mine in Nevada the best route to remaining solvent. There has also been
speculation that Burnstone could be sold, with at least one junior having kicked the
tyres in the past.
News of Dippenaar’s resignation comes hours ahead of its June-quarter report back
(3pm SA time) to shareholders, in which a dire performance by Great Basin’s South
African asset, Burnstone, will most likely be the focus of attention.
Cash costs of $2,325/oz were nearly double RBC Capital Market’s expectation of
$1,350/oz for the quarter, a performance stemming from lower production, which
came in at 6,325 oz against guidance of 17,790 oz. “This poor performance was
attributed to ongoing water management and underground infrastructure issues,”
said Guy in his note.
Full-year production guidance of between 90,000 oz to 100,000 oz has subsequently
downgraded to 30,000 oz by Dippenaar’s replacement, CFO Lou van Vuuren. The
Great Basin Gold board has also established a committee to find ways of raising the
$60m. As for June 30, Great Basin reported a working capital deficit of $23m, which
includes some $17m in cash.
The mine, which in December had targeted 2012 production of 135,000 oz and then
some 175,000 oz for 2013, has been refinanced on several occasions, apparently to
no avail.
In March, the company cancelled an earlier $50m share placement and replaced it
with an offering that was cheaper per share, to which warrants have been added as
a sweetener. It then hoped the $50m raised from the new share placement would
see Burnstone through to positive cash flow in the third quarter of this year.
In December, it secured a US$150m (R1.1bn) credit facility, which it said was
enough to finance additional development at Burnstone. In terms of the refinancing,
Great Basin retired existing debt, leaving U$80m for development.
