Great Basin Gold Announces Results to June 30, 2012
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Great Basin Gold Q2 2012 Results Conference Call And Webcast: Wednesday, August
15, 2012
VANCOUVER, British Columbia, July 26, 2012 /PRNewswire via COMTEX/ -- Great Basin
Gold Ltd. (Great Basin Gold or the Company) (gbg:TSX)(gbg:NYSE Amex)(gbg:JSE)
will hold its Q2 2012 results conference call and webcast on Wednesday, August
15, 2012 at 6:00 am PDT/ 09:00 am EDT/ 2:00 pm BST/ 3:00 pm SAST.
The Management Discussion and Analysis and interim Financial Statements for the
period ended June 30, 2012 will be available on the Company's website
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VANCOUVER, Aug. 15, 2012 /PRNewswire via COMTEX/ -- Strategic review process
initiated & senior management changes implemented
Great Basin Gold Limited ("Great Basin Gold" or the "Company"), (CA:GBG)(nyse
mkt:GBG)(jse:GBG) reports unaudited results for the three and six months ended
June 30, 2012 and other material corporate developments.
Executive Summary
Due to technical and infrastructure issues at both principal projects, the
Company's mining operations underperformed in the second quarter. As a result,
Great Basin Gold lost $0.05 per share on revenues of $32.4 million. Revenue
shortfalls were primarily due to delays in on-reef ore development and water
management problems at the Burnstone Mine and delays in accessing higher grade
stopes at the Hollister trial mining project. Because of the revenue shortfalls,
the Company faces a near-term liquidity challenge. The Board has formed a special
committee to consider strategic alternatives, including asset divestitures,
equity financing, bank refinancing, and other possibilities that are discussed
below. The Company has implemented an aggressive further cost reduction program
involving off-site and corporate overhead costs and is also working with its
lenders to seek to restructure the current term loan facilities to improve the
Company's cash flow in the near term. In light of the production issues, the
Company has again reviewed the carrying value of the Company's two projects,
including with independent technical consultants retained by the lenders. The
Board has concluded that no impairment charge to the carrying value of the
Burnstone mine ($653 million) or the Hollister trial mining project ($126
million) is currently warranted. In other corporate developments, Mr Ferdi
Dippenaar has resigned as the Company's President and Chief Executive Officer,
and a director, effective immediately, and Mr Lou Van Vuuren, the Company's Chief
Financial Officer has been appointed interim Chief Executive Officer and a
director. Patrick Cooke, a director of the Company and audit committee chair,
will temporarily serve as unremunerated interim Chief Financial Officer and the
audit committee will be reconstituted during this period.
The Company believes that the technical and infrastructure issues that lead to
this quarter's unexpectedly poor operating performance are substantially behind
it, and forecast combined production for the remainder of 2012 to be in the range
of 58,000 to 68,000 Au eqv oz.
Combined Operations
3 months ended6 months ended
June 30March 31June 30June 30June 30
20122012201120122011
Recovered Au eqv oz121,08022,91131,65143,99061,244
Au eqv oz sold20,47321,55540,14142,02860,259
Realized Au eqv price$1,581$1,548$1,413$1,564$1,379
Revenue ($'000)$32,371$33,373$56,738$65,744$83,081
(Loss) profit from operating activities ($'000) ($19,641) ($7,650)$6,808($27,291) $6,431
Net (loss) profit ($'000)($21,990) ($17,770) ($1,051) ($39,760) ($21,392)
Adjusted loss per share($0.05)($0.03)($0.00)($0.08)($0.02)
1 Gold equivalent ounces calculated using metal price of US$1,400/oz for Au and
US$30/oz for Ag.
Hollister
A total of 23,720 tonnes (q1 2012:21)(q1 2012:142 tonnes) were trial mined at the
Company's Hollister operation in Q2 2012, yielding 14,857 gold equivalent
contained ounces (q1 2012:20)(q1 2012:459 Au eqv oz). Although tonnage mined was
only slightly below planned levels, a lower-than-plan mining grade of 0.63 Au eqv
oz/t (q1 2012:0.97 Au eqv oz/t) resulted in a lower than planned recovery of
14,688 Au eqv oz in Q2 (q1 2012:16)(q1 2012:240 Au eqv oz). The high-grade nature
of the Hollister ore body can lead to quarterly grade fluctuations, which are
evident when comparing the average grade of1.35 Au eqv oz from production in Q2
2011 to the average grade of 0.63 Au eqv oz/t from production in Q2 2012. In
order to counter decreasing grade trends, efforts in the current (third) quarter
are being focused on decreasing stope width and controlling dilution; early
indications are that up to 20% reductions in stope widths are achievable. Long
hole stoping accounted for approximately 11% of production during the period and
is considered the main contributor to the excessive dilution. Current mine
planning suggests an increase in grade for the remainder of the year as a result
of higher-grade stopes being available for mining. The Company is currently
updating its mine plan in conjunction with updating reserve estimates which may
impact production estimates going forward.
During the first half of 2012, Hollister experienced challenges in mining
flexibility due to the lack of available working stopes as well as a high rate in
turnover of personnel. Development for the quarter was focused on providing
access to the Upper Zone for additional delineation drilling, infrastructure
construction, and accelerated production from higher-grade mining areas.
During the quarter, the Esmeralda Mill at 93% availability processed 25,811 dry
tonnes during the quarter (q1 2012:20)(q1 2012:042 tonnes) and achieved
recoveries of 90% and 59%, respectively, for gold and silver (q1 2012:87% Au and
62% Ag). Work on the acid wash and carbon regeneration circuit was completed
during June 2012 and all dor? is now being poured on site.
A total of 14,863 Au eqv oz were sold during the quarter (q1 2012:15)(q1 2012:357
Au eqv oz). Au eqv oz recovered but not sold decreased by 2,239 Au eqv oz to
12,208 Au eqv oz from the previous quarter. Cash costs of $983 per Au eqv oz were
recorded for the quarter (q1 2012:$850 per Au eq oz); cash costs were negatively
impacted by the lower mining grade as well as the additional transport costs
incurred to process the carbon at Rand Refinery in South Africa.
Burnstone
Technical challenges at the Burnstone mine continued in the second quarter with
the temporary service water handling system failing to provide for the increasing
mining areas during May and June, which severely affected production levels.
Development and stoping activities were constrained due to the limited supply of
service water. Although a temporary solution was implemented by early June, and
production and development levels in July were back to levels achieved at the end
of 2011, quarterly targeted levels for development and stoping were not met and
this will have a related negative impact on production targets for the remainder
of the year.
As a result of the infrastructural challenges, the Burnstone operations produced
6,392 Au oz in the quarter (q1 2012:6)(q1 2012:671 Au oz), compared to the
forecast of 17,790 Au oz; however, good progress is being made with the
completion of the permanent water handling system, which is expected to be
commissioned during the September quarter and reduce the risk of production
interruptions related to service water supply.
Good progress was made during the quarter on vertical shaft and other
infrastructure construction that will enable the mine to regain its momentum in
meeting the increasing development and production targets. Cash costs of $2,325
per oz for the quarter were recorded (q1 2012:$2)(q1 2012:182 per oz) and were
impacted by the low head grade of material delivered to the mill but due to the
low volumes from the delay in ramp-up these costs are not yet considered
meaningful relative to post-ramp-up (steady state) production cost estimates.
Steady state production is not expected to be achieved until 2014.
The Company plans to implement a number of near-term steps to enable a turnaround
at Burnstone. The Company believes it will be able to reduce costs through
reduction of off-site supervisory and premises costs and improvements to the use
of labour and water-handling. These actions could result in aggregate cost
reductions in the range of ZAR20 million ($2.5 million) per month after a few
months.
Based in part on discussions with the Snowden Group, the independent technical
advisors retained by the Company's lenders, Great Basin Gold's management
currently estimates production of 30,000 Au oz in 2012 and 90,000-100,000 Au
ounces in 2013.
Financial Results and Corporate Matters
Revenue of $32 million was recorded for the quarter, a decrease of 44% over the
comparative period in 2011. The decrease in revenue can largely be attributed to
the decrease in ounces sold from the Company's Nevada operations which had sold a
record amount of metal Q2 2011 as a result of exceptionally high-grade material
produced during that quarter as well as settlement for some ounces recovered in
Q1 2011. The increase in cash and non-cash costs had a negative impact on the
loss from operations which came to $20 million (q2 2011:$7 million profit). A
further $1.4 million impairment charge arising from the loan advanced to our
South African BEE partner (Tranter) was recorded. The guarantee has now been
fully called upon and the monies loaned by Great Basin Gold to Tranter and, in
turn, paid by Tranter to its banker, Investec, have been written down to a
nominal value in the Great Basin Gold accounts. The operational performance from
the Nevada and South African operations resulted in a working capital deficit of
approximately $23 million on June 30, 2012.
Strategic Review Process
The Company's Board of Directors has recently initiated a review process to
consider a range of strategic alternatives with a view to preserving and
enhancing shareholder value in light of continued financial challenges from the
operational difficulties experienced, particularly with the production ramp up at
the Burnstone mine. Strategic alternatives are likely to include, but are not
limited to, the sale of all or a portion of the Company's assets, a merger or
other business combination transaction involving a third party acquiring all of
the Company, a capital raising, sale of royalties or metal streams,
recapitalization, reorganization, or restructuring of the Company, as well as
continued execution of the Company's existing business plan, or some combination
of these alternatives.
A special committee ("Special Committee"), consisting of independent directors,
Ron Thiessen, Patrick Cooke, Anu Dhir, Barry Coughlan and Philip Kotze, has been
appointed to oversee the strategic review process. CIBC World Markets Inc.
("CIBC") has been retained as financial advisor to the Board.
As part of this strategic review process the Company's President, Chief Executive
Officer ("CEO") and director, Mr Ferdi Dippenaar has resigned and Mr Lou Van
Vuuren, the Company's Chief Financial Officer ("CFO") has been appointed as
Interim CEO and director, both with immediate effect. In addition, Patrick Cooke,
a director of the Company and the audit committee chair, will temporarily serve
as unremunerated Interim CFO.
Great Basin Gold has also implemented an aggressive cost reduction program and is
also working with its lenders to potentially restructure the current term loan
facilities to improve the Company's cash flow in the short to medium term. The
Special Committee currently intends to seek to raise, through a combination of
asset sales or new equity, a minimum amount of $60 million to relieve the near
and intermediate liquidity concerns.
It is the Company's current intention not to disclose developments with respect
to the strategic review process unless and until the Board of Directors has
approved a specific transaction or otherwise determines that disclosure is
necessary or appropriate. Investors should be aware that financing will be
solicited on terms the Company cannot currently predict and that a transaction
could be announced at any time. The Company cautions that there are no assurances
or guarantees that the process will result in a transaction or, if a transaction
is undertaken, as to the terms or timing of such transaction.
Great Basin Gold Chairman Ron Thiessen commented: "The water infrastructure
setbacks at our Burnstone mine and the slower access to higher-grade stopes at
Hollister converged at a difficult time and have created a near-term liquidity
challenge for the Company which the Special Committee and CIBC will need to
address as a priority. While the Board believes in the underlying value of the
Company's two principal gold projects, our current financial situation requires
that we will investigate all potential liquidity sources. As our financial
situation and the results of our Strategic Review process may require us to
institute material changes in the Company, the Board felt changes in the
executive suite were necessary. Mr Dippenaar oversaw the development of the
Company's two gold mining projects during a period which witnessed the worldwide
financial crisis, skyrocketing capital cost and other challenges which the
Company ultimately overcame. We thank him for his dedication and wish him well in
his future endeavours. Mr Van Vuuren has been Great Basin Gold's CFO since 2008,
has long-term relationships with the Company's lenders and understands every
facet of the Company's operations. He will be of key assistance to the Special
Committee and we welcome his assumption of duties as Interim CEO."
Lou van Vuuren Interim CEO
Shareholders of the Company are reminded that they may request a hard copy of the
complete audited financial statements free of charge upon request from any of the
Investor Services personnel above or from the Company's Corporate Office at Tel:
+27 (0) 11 301 1800, Fax: +27 (0) 11 301 1840 or Email: info@za.grtbasin.com.
This document contains "forward-looking statements" that were based on Great
Basin Gold's expectations, estimates and projections as of the dates as of which
those statements were made. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as "outlook",
"anticipate", "project", "target", "believe", "estimate", "expect", "intend",
"should" and similar expressions. Forward-looking statements are subject to known
and unknown risks, uncertainties and other factors that may cause the Company's
actual results, level of activity, performance or achievements to be materially
different from those expressed or implied by such forward-looking statements.
These include but are not limited to:
uncertainties and costs related to the Company's exploration and development
activities, such as those associated with determining whether mineral resources
or reserves exist on a property;
uncertainties related to feasibility and sensitivity studies that provide
estimates of expected or anticipated costs, expenditures and economic returns
from a mining project; uncertainties related to expected production rates, timing
of production and the cash and total costs of production and milling, all of
which impact on project valuation;
uncertainties related to the ability to obtain necessary licenses, permits,
electricity, surface rights and title for development projects; operating and
technical difficulties in connection with mining development activities;
uncertainties related to the accuracy of our mineral reserve and mineral resource
estimates and our estimates of future production and future cash and total costs
of production, and the geotechnical or hydrogeological nature of ore deposits,
and diminishing quantities or grades of mineral reserves;
uncertainties related to unexpected judicial or regulatory proceedings;
changes in, and the effects of, the laws, regulations and government policies
affecting our mining operations, particularly laws, regulations and policies
relating to
mine expansions, environmental protection and associated compliance costs arising
from exploration, mine development, mine operations and mine closures;
expected effective future tax rates in jurisdictions in which our operations are
located;
the protection of the health and safety of mine workers; and
mineral rights ownership in countries where our mineral deposits are located,
including the effect of the Mineral and Petroleum Resources Development Act
(South Africa);
changes in general economic conditions, the financial markets and in the demand
and market price for gold, silver and other minerals and commodities, such as
diesel fuel, coal, petroleum coke, steel, concrete, electricity and other forms
of energy, mining equipment, and fluctuations in exchange rates, particularly
with respect to the value of the U.S. dollar, Canadian dollar and South African
rand;
unusual or unexpected formation, cave-ins, flooding, pressures, and precious
metals losses (and the risk of inadequate insurance or inability to obtain
insurance to cover these risks);
changes in accounting policies and methods we use to report our financial
condition, including uncertainties associated with critical accounting
assumptions and estimates;
environmental issues and liabilities associated with mining including processing
and stock piling ore;
geopolitical uncertainty and political and economic instability in countries
which we operate; and
labour strikes, work stoppages, or other interruptions to, or difficulties in,
the employment of labour in markets in which we operate mines, or environmental
hazards, industrial accidents or other events or occurrences, including third
party interference that interrupt the production of minerals in our mines.
Cautionary Note regarding Non-GAAP Measurements
Cash cost per ounce/tonne is a not a generally accepted accounting principles
("GAAP") based figure but rather is intended to serve as a performance measure
providing some indication of the mining and processing efficiency and
effectiveness of operations. It is determined by dividing the relevant mining and
processing costs including royalties by the ounces produced/tonnes milled in the
period. There may be some variation in the method of computation of "cash cost
per ounce/tonne" as determined by the Company compared with other mining
companies. Cash costs per ounce/tonne may vary from one period to another due to
operating efficiencies, waste to ore ratios, grade of ore processed and gold
recovery rates in the period. We provide this measure to our investors to allow
them to also monitor operational efficiencies. As a Non-GAAP Financial Measure
cash costs should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP. Adjusted loss per share is also
a Non-GAAP measure and is calculated by excluding the impact of certain
fair-value accounting charges and once-off transactions. We also make reference
in our disclosures to "working capital" which is also a Non-GAAP measure and
includes cash and cash equivalents, trade and other receivables, current
inventories, trade payables and accrued liabilities. There is material
limitations associated with the use of such Non-GAAP measures.
For further information on Great Basin Gold, investors should review the
Company's annual Form 40-F filing with the United States Securities and Exchange
Commissionhttp://www.sec.gov and home jurisdiction filings that are available
athttp://www.sedar.com. |
