[miningmx.com] — SHARES in Great Basin Gold gained 12% on Wednesday following an announcement it had secured a $150m credit facility, enough to finance additional development of its South African Burnstone mine.
Ferdi Dippenaar, CEO of Great Basin Gold, told Miningmx there had been a perceived threat that the company wouldn’t secure the funding.
This was after a 56% decline in the share price in three months from September in a period in which management said mistakes had been made in mine ramp-up. There was also a report by RBC Capital Markets that the mining method at the Burnstone mine would not work as efficiently as first thought.
“RBC has supported the stock in the past so when it changed its mind on Burnstone I think alot of investors took flight,” said Dippenaar, who added that despite some miscalculations regarding the geology of the Burnstone orebody, the mine would start to deliver as promised in 2012.
In terms of the debt package announced today, Great Basin would retire existing debt leaving access to $80m. “The facility, for which the Burnstone project is primary security, has a maximum term of 5 years from date of draw-down, with capital repayment commencing March 15, 2013 and bears interest at a margin of 4% over the US dollar LIBOR rate,” Great Basin Gold said in its announcement.
In its report dated November 18, Leon Esterhuizen, a gold analyst for RBC Capital Markets, remarked: “Despite some improvements in the longhole stoping methodology at Burnstone … the overall performance and delivery has been extremely disappointing. … Although the method could still work, we believe it will deliver lower efficiencies (lower grades, higher costs) than initially anticipated.”
Another broker, Raymond James, also commented that Great Basin’s Burnstone mine had been a disappointment this year, although it sounded a slightly more hopeful note.
“Although the experience and knowledge gained over the past year should ultimately lead to a more reliable and better optimized operation, we believe the market will remain in a ‘wait & see’ posture until clear operating improvements are achieved at Burnstone,” its analysts said in a report dated November 21.
Said Dippenaar: “We have just completed a roadshow in North America where we have addressed the last quarterly performance. We have told analysts that the mining method will work”.
From the outset, Great Basin decided to adopt a mechanised mining method and consequently developed Burnstone exclusively around this plan. However, a misreading of the geology, with the first block to be mined some 80 metres deeper than anticipated, led to another under-estimation of its impact on ramp-up.
Miningmx reported in October that: “Gold production is running way below plan as Burnstone produced 6,519 oz of gold in the September quarter (June quarter: 5,619 oz) which was less than half the 14,000 oz of gold that was supposed to be produced”.
“We have done another 16km of drilling to make sure this [misreading of blocks to be mined] doesn’t happen again. We’ve done the right thing,” said Dippenaar.
