Great Basin Gold Announces Results for the Quarter Ended September 30, 2012
JOHANNESBURG, SA, Nov. 15, 2012 /PRNewswire via COMTEX/ -- Updates Insolvency
Proceedings and Strategic Review Process
Great Basin Gold Ltd. ("Great Basin Gold"), (nyse mkt:GBG)(jse:GBG) announces
results for the quarter ended September 30, 2012 and updates the previously
announced insolvency proceedings and the strategic review process. This release
should be read with the Company's third quarter unaudited interim Financial
Statements and Management Discussion & Analysis (MD&A), available at
grtbasin.com and filed today on sedar.com.
Summary Operating Statistics Table:
3 months ended9 months ended
September 30 June 30September 30 September 30 September 30
20122012201120122011
Recovered Au eqv oz21,62021,08032,53165,61093,775
Au eqv oz sold24,44920,47329,30866,47789,567
Realized Au eqv price$1,572$1,581$1,593$1,567$1,449
Revenue ('000)$38,436$32,371$46,673$104,180$129,754
Loss from operating activities ('000) ($16,268)($19,641) ($8,000)($43,559)($1,569)
Net loss ('000)($89,606)($21,990) ($33,987)($129,366)($55,379)
Adjusted loss per share($0.04)($0.05)($0.03)($0.13)($0.07)
Hollister
24,766 tonnes (q2 2012:23)(q2 2012:720 tonnes) were trial mined at the Company's
Hollister operation in Q3 2012 yielding 21,072 gold equivalent contained ounces1
(q2 2012:14)(q2 2012:857 Au eqv oz). Although tonnage mined remained below
planned levels, an improved mining grade of 0.85 Au eqv oz/t (q2 2012:0.63 Au eqv
oz/t) resulted in an improvement in recovered metal of 16,319 Au eqv oz for the
quarter (q2 2012:14)(q2 2012:688 Au eqv oz). The action plan to counter
decreasing grade trends focussed on decreasing stope width and controlling
dilution has resulted in an improvement in Q3 and more work remains to be done in
this area.
The Esmeralda Mill processed 22,789 dry tonnes during the quarter (q2 2012:25)(q2
2012:811 tonnes) and during Q3 2012 achieved recoveries of 92% and 51% for gold
and silver respectively (q2 2012:90% Au and 59% Ag). Work on the acid wash and
carbon regeneration circuit was completed during June, 2012 and all dor? is now
being poured on site.
19,392 Au eqv oz were sold during the quarter (q2 2012:14)(q2 2012:863 Au eqv oz)
at cash costs per Au eqv oz for the quarter of $1,096 (q2 2012:$983) and were
negatively impacted by the lower mining grade achieved as well as lower than
expected recoveries from the carbon-in-leach at the refinery.
__________________________ 1 Metal prices used for Au eqv calculations are $1400
Au and $30 Ag.
Burnstone
Progress was made in Q3 2012 including completion of the permanent infrastructure
and improvements to the temporary infrastructure which allowed for a marked
improvement in production results until the suspension of development and
production activities occurred in early September 2012.
A care and maintenance program was implemented at Burnstone following the
suspension of production and development in order to preserve value of the asset
and ensure minimal costs associated with production re-commencement. The care and
maintenance team ensures the continuation of water reticulation and safeguarding
of mine assets along with compliance with operational permits. Southgold, the
legal entity which owns the Burnstone project, filed for Business Rescue
proceedings on September 14, 2012 under the South African Companies Act and is
now under management of the appointed Business Rescue Practitioner. Substantially
all of the approximately 1,000 employees were laid off on September 17, 2012 and
were paid required severance in compliance with South African labour law.
Financial Results and Insolvency Proceedings
The insolvency proceedings involving the Company and its subsidiaries include
"Business Rescue" proceedings under the South African Companies Act as well as
the Companies Creditors Arrangement Act ("CCAA") filing in Canada, both of which
occurred in September. These proceedings resulted in additional legal and other
administrative costs and so had a negative impact on the Company's financial
results for the third quarter and which costs are ongoing.
In approving the third quarter results the Board of Directors again reviewed the
Company's status as a going concern in light of the Company's insolvency and the
creditor protection proceedings. The Board concluded that the Company can still
be fairly characterized as a going concern so long as the strategic review and
assets divestiture processes have not produced determinative evidence of asset
impairment and creditors are awaiting the outcome of the process. Accordingly,
the Company continues to carry assets at cost and did not record any asset
impairment charges on its two principal projects (Burnstone and Hollister) in the
third quarter. However, this conclusion is tentative and will have to be
carefully monitored in the light of any purchase or partnering offers (or the
absence of offers) which may be received and which individually or in aggregate
are determinative that the near-term realizable value of one or both of these
assets is materially below its carrying value. Other indicia might include, for
example, a further downward revision in mineral reserves at either project or a
significant change in estimated operating or restart costs. Hollister reserves
were recently reviewed internally resulting in a write-down of reserves which was
announced in September, and these reserves continue to be subject to further
review so additional write-downs remain possible.
An impairment charge to the Tanzanian exploration properties of $25 million was
recorded based on objective evidence that the fair value of the properties in the
current environment is less than their carrying value. The initiation of the
insolvency proceeding filings in South Africa and Canada resulted in defaults
under the term loan facilities and Convertible Debentures ("CDs") indentures,
which required treatment of these liabilities as current with the remaining
accretion charge of $23 million on the Company's 2014 CDs accelerated and
recognized during the quarter. The zero-cost-collar ("ZCC") hedge program for
Burnstone was early terminated by the hedge providers in October 2012, thereby
realizing the already accrued loss of $25 million with the amount added to the
Term loan.
Strategic Review Process and DIP Loan
In September, the Company was offered a $35 million debtor-in-possession (DIP)
Loan from its existing term loan Lenders in order to fund an orderly wind-down at
Burnstone and to pay down other pressing payables. The terms of the DIP Loan
provided for a contingent cross-collateralization of the Lenders' existing
Burnstone Loan over the Company's Hollister assets which could have resulted in
circumstances where the Lenders' Burnstone loan would have additional priority
over the amounts owed to holders of the CDs. The DIP Loan collateralization issue
resulted in a legal dispute between the Lenders and the CD holders, which had a
negative impact on the asset sales process and resulted in additional legal
costs. The Company is obligated to assume the legal costs of the Lenders and CD
holders and the Company estimates that the professional fees of the parties which
are being borne by the Company arising out of the insolvency to the date of the
Company's MD&A filing are in the $10 million range. The DIP Loan has been drawn
down the extent of $19.7 million as of the date hereof and it remains in
technical default because the inter-creditor settlement has not been signed as of
the date hereof and for certain other events however the lenders have not taken
any realization steps in furtherance of the default at this time but further
draws under the DIP Loan may require resolution of the existing events of
default.
An in-principle settlement agreement on the DIP Loan collateralization dispute
appears to have been reached but the definitive settlement agreement currently
remains in negotiation. The appointment of CIBC World markets to facilitate the
recapitalization and/or sale process for the Nevada assets has been finalized and
at the request of the Lenders, the Company agreed to the appointment of the South
African branch of an international investment banker to facilitate the Burnstone
sale process. The Company is currently working to finalize the scope and mandate
of the second investment banker. A further requirement from the Lenders was that
the executive management of the Company be replaced by an independent
restructuring team to be appointed to manage the Company and its Nevada
subsidiaries during the restructuring process. The Board has agreed in principle
to the appointment of a restructuring team which will involve engaging a
professional insolvency management company to perform the functions of a chief
executive officer and chief financial officer through the strategic review
process which is scheduled to end no later than March 31, 2013. The restructuring
personnel will continue to report to the Board. The engagement of the
professional restructuring firm is expected to be effective before November 30,
2012 to coincide with the departure of the current interim-CEO. The terms of
engagement of the South African Business Rescue Practitioner also remain in
negotiation at this time.
The Company's current cash flow forecasts suggest that further funding of US$15 -
20 million will be required in addition to the DIP Loan by January 2013 to fund
the associated professional costs of the process assuming no significant asset
sales or other transaction completes before then. The Company and Lenders are
currently discussing alternatives to bridge the potential funding short fall but
there can be no assurances that a resolution for the shortfall will be found.
Lou van Vuuren CEO (interim)
Cautionary and Forward Looking Statement Information
This document contains "forward-looking statements" that were based on Great
Basin'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 related to the Company's insolvency and related legal proceedings
and need for near term financing
uncertainties related to project realization values
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 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;
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.
There is currently no certainty that Southgold Exploration (Pty) Ltd will
successfully emerge from business rescue proceedings or that Great Basin Gold
Limited will emerge from CCAA and thereby prevent liquidation of these entities.
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
Commission sec.gov and home jurisdiction filings that are available at
sedar.com. |
