Crew Gold Plays Hard To Get And Its Strategy Is Difficult to Understand
By Rob Davies
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Minews knows how difficult it is to run a company, especially a mining company with operations in far flung parts of the globe. So getting hold of mining executives can be a time consuming exercise allowing for time zones, travel and limited phone networks in some places. Add to that the periods when companies can’t say a lot because of upcoming announcements, then the chances of actually having a decent conversation with the management of a junior resource company are actually quite low. That said, this writer has been trying to get hold of someone at Crew Gold for a very long time without success. So what follows is our interpretation of where the company is.
Crew doesn’t make life easy for itself by having three small operations in very different and distant parts of the world. Gold mines in Greenland, Guinea and the Philippines don’t provide a lot of scope of synergy and cost cutting. The market has taken a rather cautious view of this portfolio over the last year marking the shares down from C$2.20 to C$1.51 but that still leaves it capitalised at C$700million. That is quite a price tag for a company that reported a net loss of C$27million for the quarter to end March 2008. Part of the reason for the loss is that the company is operating at way below its planned rate of 550,000 ounces a year.
In the first quarter of this year it only produced 61,000 ounces, an annualised rate half of what it should be. However, that was a marked improvement of 36 per cent on the previous quarter. The blame for this shortfall lies with the Lefa mine in Guinea where an upgrade and rectification plan is now nearing completion to deal with the problems of this mine. Commissioning was plagued by equipment failures and power problems and as these issues are being addressed production is gradually increasing.
A new apron feeder at the Fayalala crushing station is proving more reliable and the replacement of 12 agitators has improved recovery at the plant from 88 per cent to 94 per cent. A significant improvement will be the conversion of the generators to run on heavy fuel oil that will have a two fold benefit. It will reduce costs and allow more fuel to be stored on site and thus avoid the power shortages that were a problem in the previous wet season when there was fuel shortage. Now that the operational issues are being dealt with more effort can be spent on increasing the resource of the camp.
Far removed from the tropical heat of Guinea is the Nalunaq mine in Greenland. This small but high grade operation ships ore directly to the Nugget Pond processing facility in Newfoundland. Unfortunately, bad weather hampered operations and the two sites only produced a total of 12,000 ounces for the quarter which is not enough to generate a positive cash flow. More encouraging is the Maco mine in the south of the Philippines. While it is still regarded as being in the development stage it produced 5,000 ounces in the first quarter of 2008. Such a small scale vein mining style of operation is never going to give high production volumes or low costs. Nonetheless, the company seems optimistic that improvements can be made and there is some potential for copper exploration.
Overall, Crew does seem a rather strange collection of sub-optimal gold assets, but maybe there is an overall grand strategy lurking somewhere in the boardroom. It would be good if it told shareholders what it was. |
