THE panic is over for Resolute Mining which had the mining lease to its Bibiani mine restored by the Ghanaian government on Wednesday.
However, the restoration of the lease comes with conditions, primarily that a future sale of the mine, including to the intended buyer Chifeng Jilong Gold Mining Company, had to first pass muster with the Ghanaian government.
Shares in the Australian miner recovered about 14% in Sydney late on Tuesday in recognition that tenure was more important than selling the asset – the loss of a short term boost to the firm’s balance sheet notwithstanding.
Resolute was to bank about $105m from the sale of Bibiani, currently in mothballs, before the Ghanaian government terminated the mining lease earlier this month. Proceeds from the sale to Chifeng would have accelerated the deleveraging of the firm’s balance sheet.
Resolute said in March that it expected to generate sufficient operating cash flows to support debt repayments of $50m in 2021. This included the early repayment of $25m above the minimum debt repayment obligations of $25m due in September 2021.
Net debt as of December 31 stood at $230m, a 28% year-on-year reduction, after taking into account cash and bullion of $106m.
As part of the Ghanaian government’s conditions, Resolute had to “accept and acknowledge” that its mining lease had been terminated by the government, a stipulation giving uncontested legal force to the termination.
In addition, Resolute and the local entity through which it controls Bibiani must jointly submit a report against which the Ghanaian government will test compliance against its environmental, health and safety conditions contained in the country’s mining act.
The Ghanaian government also objected to the sale of the mine to Chifeng adding that any future sale to Chifeng or a third party must have its “the express prior approval”.
Stuart Gale, interim CEO of Resolute, indicated that the termination and reinstatement of the Bibiani mining lease was an interruption to its sales plan.
He said: “I would also like to thank Chifeng for their patience during this process and we look forward to continuing the working relationship which has been developed since announcing the sale in December. We remain committed to the development of Bibiani and will consider all options available to achieve this”.
Shares in Resolute have been struggling for 12 months at least, plummeting to a five-year low earlier this month before it unveiled an increase in its eight-year gold output outlook of 250,000 to 300,000 ounces. This compares to 2020 production of 214,360 oz at an average AISC of $1,203/oz.