Crew Gold Is Taking A Large Bet On The LEFA Gold Mine After Other Operations Were Scaled Back Last Year
By Charles Wyatt
minesite.com
When Rob Davies last wrote about Toronto and Oslo listed Crew Gold Corporation back in June 2008 it was clear that several things were amiss. For a start, at that stage the company had three gold mines in different parts of the world, and none of them were performing to scratch. It is difficult enough to run one mine in one country, but when you have one in Greenland, one in West Africa and the other in the Philippines, life can get pretty tricky. This was evident from the fact that only 61,000 ounces of gold were produced in the first quarter of 2008, an output which was only about half of what it should have been, given that the target had been set at an annual 500,000 ounces. The other problem that Rob ran into when he was putting his article together last summer was in getting anyone to give an explanation. This was especially odd, as the then chief executive, Jan Vestrum, had always been very helpful in keeping Minesite up to speed.
It therefore did not come as a total surprise when the company announced in August that Jan had left the company with immediate effect. William LeClair, the chief financial officer, stepped up as interim chief executive while the company sought out a successor for Jan. The search still seems to be going on. Cameron Belsher, the chairman, was gracious in his farewell to Jan, saying, “since Mr. Vestrum assumed the chief executive officer position in 2002, Crew has been transformed from a small junior exploration company with no production to an emerging mid-tier gold producer with approximately 70,000 ounces of production last quarter. Crew now has a strong technical and operating team focused on continuing to significantly improve the production profile of the company's principal operating asset at the LEFA gold mine in Guinea”.
Minews chased after Jan for a comment, but he was not prepared to say much except that it was difficult to run a company where a non-executive director had effective control. A bit of homework on the website shows that this director is Jens Ulltveit-Moe who is chief executive of Umoe AS, a large Norwegian-based conglomerate. Mr. Ullveit-Moe has spent most of his career in the shipping industry, according to his CV, and is a past president of NHO, the Confederation of Norwegian Business and Industry. In this same CV he is said to control, directly and indirectly, approximately 23 per cent of Crew Gold, but in the Notice of a Special Meeting of Shareholders due to take place on 30th January Mr. Ulltveit-Moe is confirmed as owning directly or indirectly 38.5 per cent of the equity.
Since Jan left the company a major decision has been made: Crew has suspended mining operations at the Nalunaq gold mine in Greenland. The reason given was that ore strike lengths have not been up to expectations. One ore body had already been developed at the time this decision was made, but once the ore has been extracted from that, the mine is being placed on care and maintenance. This should happen any time now, but it will take a little longer to get the ore processed through the company’s the Nugget Pond facility. When that job is finished Nugget Pond will also be put on care and maintenance, unless, that is, profitable toll milling contracts can be negotiated to keep it in operation.
This means that LEFA is Crew’s main mine, and the subject of Crew’s main focus now. Production at LEFA is benefiting from major upgrade and rectification work currently being carried out. At the end of the third quarter Crew still had C$28 million in the kitty to pay for the ongoing work, and over Christmas the company carried out a rights issue that raised just over C$18 million, with help from two brokers in Oslo. This was a bold stroke which would probably not have been possible in Toronto. But in a way, there was little choice, as it is vital that the work being carried out at LEFA gets completed, so that the mine can achieve its target of producing 310,000 ounces of gold in 2009 at a cash cost of US$488 per ounce. This remains the target, according to William LeClair, so by the end of this year Crew should be producing at an annual rate of 360,000 ounces. There is still plenty of rectification work to be done, including the introduction of two generators, a new crushing system, gear systems on both SAG mills, and a gold elution circuit. But after all that work is eventually done the focus can switch to increasing resources by exploration around the mine.
A major jolt occurred when Crew Gold was told on 28th December by the military in Guinea that it had to stop work at LEFA while a review of all mining concessions was carried out by the new regime. This command was withdrawn the next day and work resumed, but it was a reminder of just how important it is to have good relations with whatever government is in power in some African countries. From Guinea, where he is on a visit to the mine, William LeClair confirms that the situation is getting better by the day. It is worth remembering, however, that Crew Gold’s only other producing asset is the Maco mine on the island of Mindanao in the Philippines, a project which is still effectively at the development stage. Production from Maco totaled just over 10,000 ounces in the second and third quarters of 2008.
It is hoped that the annual rate of production from Maco could rise to around 50,000 ounces by 2010. In the meantime a technical review has indicated that there could be by-product upside from metals such as copper and zinc. The porphyry copper potential is also being evaluated, but this would be expensive, so discussions have been taking place with potential partners. William LeClair has nothing further to add about progress at Maco, but at least Crew Gold has increasing gold production and money in the bank to complete rectification at LEFA which is proceeding on schedule. Things could be worse, even if Nalunaq is out of the picture for the time being. |
