|Wednesday, 30 May 2012Blair Price|
AFTER a considerable delay, Mining Minister Byron Chan has signed off on key mining and exploration licence renewals for New Guinea Gold’s Sinivit mine in Papua New Guinea but the scrip-based acquisition of NGG by PNG Gold Corporation remains in doubt.
|Byron Chan - image courtesy of his blogspot website.|
|Sinivit: Vat 2 & Vat 3 in the foreground|
Mining lease 122 was renewed for 10 years, mining easement 70 was renewed for 8 years while the nearby Sinivit exploration licence (EL 1140) was renewed for two years.
Unsurprisingly, NGG chairman Ces Iewago said the approvals were a great outcome.
He even revealed there was possible interest from the PNG government, presumably through a state-owned enterprise such as Petromin, to buy into the small Sinivit mine in East New Britain.
“We look forward to working closely with all of our stakeholders to maximise the value and benefits deliverable from the Sinivit mine and the surrounding high-potential exploration acreage,” Iewago said.
“The possible addition of the state as a stakeholder in the project would be welcomed and the expression of interest confirms the belief the PNG government has in the potential of the project.”
However, earlier approval of the mining and exploration licence renewals would have made a big difference to PNG Gold’s plans to acquire NGG.
In late October, PNG Gold struck a conditional agreement to acquire fellow Toronto-listed NGG. The deal required the Sinivit mining and exploration leases to be renewed by the PNG government by the end of May to go ahead.
While the condition has finally been met, NGG appears to have had issues getting in contact with PNG Gold for weeks.
NGG is also suffering from a severe cash shortage.
Part of this is due to the fallout from an illegal landowner occupation of the Sinivit mine for a week during the Christmas to New Year’s Eve holiday season.
The damage to equipment during this time caused the mine to lose two months of production.
But another restraint is the plan of arrangement agreement with PNG Gold.
Until this agreement expires on May 31, NGG is unable to tap into its investment portfolio, or even issue shares, to address its cash drain.
PNG Gold is also seeking a $C1 million loan repayment from NGG.
“The board is currently considering the options available to raise the necessary short-term
working capital requirements and address the longer term objectives of the company,” NGG said.
Mining at Sinivit is scheduled to wind down towards the end of this quarter.
There is an ongoing definitive feasibility study to extend mining but there are some discouraging signs already.
“Whilst the DFS is not yet complete, current indications are that it will result in a marginal economic benefit at best,” NGG said.
“The draft capital expenditure estimate is slightly above $20 million compared to the $12-15 million initial estimate.
“Furthermore, the assay results from the previously gathered samples have resulted in a +/-15% reduction in the contained ore estimate.”
NGG has stakes in PNG explorers Gold Anomaly, Coppermoly and Vangold, which could be sold to raise funds.
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