[miningmx.com] – GREAT Basin Gold took its first, tentative steps
towards turning around its South African gold development asset, the Burnstone mine,
meeting March (FY Q1) gold production targets.
However, at C$0.60c/share ahead of the results announcement, Great Basin’s shares
have never been lower, suggesting the recovery of an asset like Burnstone has some
way to travel before investor faith is resuscitated in the company at large.
Compounding the company’s short-term headaches, meanwhile, Great Basin reported
milling problems at its US operation which dampened total gold production.
Nonetheless, this was a start. Burnstone produced a modest 6,671 oz of gold, but it
was ahead of the 5,511 oz target for the first quarter. Ore development was also
double the targeted level as Great Basin management set about building flexibility in
an orebody that has thrown up challenging geology. The Burnstone team also worked
to head off future flooding problems which developed in the last quarter as gold-
bearing ore proved deeper than originally thought. “The bulk of all the infrastructure
problems experienced in 2011 will have been resolved by mid-2012,’ the company
said in its announcement.
Total production in the first quarter of Great Basin’s financial year came in at 22,921
oz. This was nearly a fifth below gold production in the corresponding quarter of the
previous financial year, and was related to disruptions at the Esmeralda mill in
Nevada where Great Basin’s Hollister mine takes its ore. This affected the timing of
sales from the operation and saw cash costs increase 27% to US$850/oz.
The increase in costs hurt Burnstone’s bottom line where it reported a 3 Canadian
cents per share loss, a cent more than in the previous financial year. Increasingly,
attention is paid to Great Basin’s liquidity after it returned to shareholders in the
fourth quarter of its last financial year, raising about C$47m in a share issue. As of
end-March, the company’s cash position stood at C$43.5m. There was a small positive
cash flow during the quarter.
Great Basin made an advance regarding its empowerment partner, Tranter Gold over
which bank Investec issued a margin call in the last quarter. This was a result of the
decline in Great Basin shares which Tranter Gold had used to guarantee a loan with
Investec. Great Basin said that it had had Investec drop the margin call. “Following
negotiations, all parties agreed to a term sheet whereby Great Basin Gold provides
further financial assistance over a period of 18 months to allow Tranter to meet the
restructured loan repayments,’ it said.
Arbitration with Gold Fields had begun regarding its decision to unwind a R80m
arrangement with Tranter Gold. This was after the Department of Mineral Resources
(DMR) declined to award Gold Fields credits for a deal in which it donated R80m to
Tranter Gold. The R80m was capital that Gold Fields had received from Great Basin
for cancellation of a 2% royalty agreement in 2007 over a portion of Great Basin’s
Balfour-based Burnstone mine.
Speaking in the previous quarter’s results, Ferdi Dippenaar, CEO of Great Basin Gold,
said: “The DMR requested that the matter be settled amicably, in a manner that will
not jeopardise the transformation agenda of the Government’. “However, settlement
negotiations failed and Gold Fields intends concluding the matter through arbitration.
Tranter has joined the company [Great Basin] in arbitration,’ he added. The
arbitration would not threaten the company’s short-term targets, Dippenaar said.
