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.
…
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.
[emphasis ours]
For current holders of the common do you have any near term recommendations at this point? Is short-term debt the main cause of need for more $$?
They sure have had a troubled past. I made some good money on the warrants but have been out ever since. Always wondered why they never just sold Hollister instead of diluting the snot out of their share base. Or maybe better yet, sell the troublesome Burnstone and concentrate on Nevada.
The risk here is a total loss to equity because they may not be able to raise the substantial cash required to keep the operations going. Fredy Dippenaar like so many other mining CEOs before him simply set the wrong tone and apparently had little idea of the challenges in operating underground mines. One positive is that he is now gone, booted on his duffer as he deserves.
The key with U/G mining is meticulous sequencing of stope development and extraction especially when mineral continuity is a challenge as the case appears to be at both Hollister and Burnstone. Simply put, you’ve got to make sure the production constrain is never due to limits on the amount of ore being extracted because there is no relatively simple solution to fixing that very serious problem. After this latest quarterly blunder I don’t think there is a short term solution to getting back on track and I’d be inclined just to write this sucker off as yet another big loss and another lesson in the difficulties of underground mining especially during start-up/expansion.
My guess is they sell Hollister because that is capable of cash flow in the shorter term and then use the proceeds to see if there is any way to rehabilitate the disaster that is Burnstone. Perhaps they get a boost in the SP if/when such a deal is announced. Alternatively maybe they give Burnstone to the creditors and keep Hollister on a relatively debt-free basis. Maybe they get back to 50 cents on the back of such “success” in the near term and at that point I would consider it a smart idea to exit there.
Longer term if they can figure out how to do U/G mining given the particular challenges at Burnstone (and South Africa more in general) then there is actually a very significant value locked up in that asset due to the large gold resource that could be potentially extracted economically. Unfortunately it appears they are way, way overstaffed at Burnstone … this could be due to social/community pressure to maximize employment at the expense of profit. Let’s see how the local peanut gallery reacts to having the extra baggage set adrift if that means saving the (still) several hundred workers that would remain gainfully employed if the mine is able to keep operating.
I don’t see how they can make a profit at Burnstone.
They cite cash costs for Burnstone in Q2 as $2,325 per Oz and also as $58 per Tonne. This means that the grade is 58/2,325 = 0,025 Oz/ Tonne or 0.77 g/T. At these grades it’s totally impossible to run an underground mine.
I don’t know how it’s possible that the resources are 5 g/T and the mined grade is 0.77 g/T. It really makes me doubt that the resource can be extracted economically.
I would say that Burnstone has zero value. Hollister probably has some value, but less than the debts.
Logical flow of events would be a total loss of all equity plus a big haircut on the debt.
@Tweetie
The thing is they have a huge fixed cost of operations at Burnstone (mostly labor) predicated on ramping up to 200,000+ ounces of production. The grade is probably an issue longer term and indeed may not be 5 grams for various reasons but at this stage they are having huge problems just getting stope faces going on the resource itself. Thus most of the production is development ore. Usually this stuff gets put through the mill when there is a significant capacity constraint within the mine along with excess mill capacity, as long as the milling cost is lower than the NSR on that rock. I’d guess 0.77 g/t, if that is truly the head grade, is right around that margin. As for the prospects, you might be right but I assume that a serious operational review will be conducted in the next several weeks and we (or at least the creditors) should know soon enough.
Portfolio Remark posted on Great Basin: http://www.metalaugmentor.com/our-portfolios/overview/