Vancouver, Canada — 16 August 2012 – Shares in Canadian-based international gold miner 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.
Miningmx reports that 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 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 Ferdi Dippenaar, who had been its CEO 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$60 million in short-term funding.
Total debt, which consists of a C$102 million convertible loan, and two term facilities of C$147 million and C$43 million, is C$293 million, and has a June 2012 settlement total of C$318 million. This is set against Great Basin Gold’s current market capitalisation of C$129.8 million.
“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 in the US “’ have carrying values on Great Basin’s books of C$630 million and C$150 million respectively.
However, Van Vuuren said that the market value of Burnstone might be “north of” C$200 million to C$300 million. “In either case, the assets are valued internally at higher than the market values the whole company. Raising further debt was quite challenging”, said Van Vuuren.
He added that costs would be reined in at the company, including off-mine costs, and urgent discussions were underway with lenders that could take as little as 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 and 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 quarter.
“Nothing is off the table, including divestitures” said a downbeat Thiessen, who had a major hand in the formation of Great Basin when it was created out of the Hunter Dickinson stable.
Source: Miningmx. For more information, click here.