ATN lost quite a bit of credibility...... Goodbye Atna Resources
It's with a lot of anger and extreme disappointment that we have decided to sell our stake in Atna Resources (atn.to). The last drop of patience we had left was lost in Wednesday's press release.
On the 17th of May we talked to IR Valerie Kimball at Atna Resources as we were worried about their low treasury and wanted an update on the progress at Pinson.
We were told that no equity financing was on the table and that Pinson should declare commercial production and turn cash flow positive before the end of June. They had ongoing discussions with several banks to establish a credit facility and this was also communicated by management in the May 14 conference call.
In our weekly update on the 19th of May we wrote:
“Guidance for Pinson in 2013 is 50-57,000 oz with major part of that being produced in Q3 and Q4. Pinson Underground should be cash flow positive within two months and commercial production will then be announced, all according to the company IR”
With that said, our target for Atna to produce at least a 100,000 oz in 2014 felt reasonable and we were buyers in the low 50´s.
Should/could Pinson survive even at $1,300 gold?
Yes it could, at least according to feasibility studies and guidance made by the company, Pinson should deliver strong returns at $1,300 gold (see table below) and who thought the mine would be put on care and maintenance at $1,400? This is a major shift in management’s view since the Q1 conference call in early May where they must have outright lied to analysts and shareholders.
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Atna will now mine at a ~100 tpd (3,000 tons per month) rate for at least 6 months (unless gold price bounces back to its old highs) using today’s five developed stopes and this will probably just cover the maintenance and overhead costs at the mine, which to us is almost the same as putting the mine on care and maintenance. During this time the company will come up with a new and more cost-effective mine plan.
Final words
Our trust and confidence in Atna's management is now between zero and nothing. The way management with its front figure and CEO Jim Hesketh are running things, opens up for discussions about their abilities to even be in this business.
We did not sell any shares in yesterday's sell-off and at 25c we might hold on a bit, we'll see.
What has looked so promising turned out to be our perhaps worst investment so far in the junior sector. It feels terrible to have lost big here, but if something good comes out of all bad things, we have at least been reminded of the high risk in this sector and the importance of a really great management.
We are once again reminded of the fact that we invest in people when we buy shares in a junior company. It's not the first time that we have encountered straight out lies and most likely not the last either.
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