Amara Mining plc - Cessation of Mining at Kalsaka and Sega Gold Mine
(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 08 August 2014
Release date- 07082014 - Amara Mining plc, the AIM-listed West African-focused gold mining company, announces that mining has ceased at its Kalsaka/Sega Gold Mine in Burkina Faso and the Directors have decided to put the operation into liquidation.
This follows the receipt of a default notice to its local subsidiary in Burkina Faso, Seguenega Mining SA ('SMSA'), from BCM International ('BCM'), the mining contractor at Kalsaka/Sega.
Amara was due to begin the closure of its two subsidiaries in Burkina Faso in Q4 2014, ahead of the scheduled cessation of production in Q1 2015, so while the default notice accelerates this event, it does not represent a material change to the Company's strategy for Kalsaka/Sega.
SMSA has taken the decision to commence liquidation in Burkina Faso to protect employees and all creditors, including Amara and its subsidiary Kalsaka Mining SA ('KMSA'), collectively SMSA's largest creditors. Processing activities carried out by KMSA are continuing in the short term pending the appointment of a liquidator for SMSA.
As a consequence of the Company's transition from producer to developer status, Peter Spivey has tendered his resignation from his position as Chief Executive Officer, and this has been accepted by the Board becoming effective immediately. John McGloin has therefore been immediately appointed as Chief Executive Officer and will retain the position of Chairman.
All cash assigned to the delivery of a Pre-Feasibility Study ('PFS') for the Yaoure Gold Project ('Yaoure') remains committed to this aim - the premature cessation of mining will not materially affect Amara's financial position
John McGloin and the Board remain focused on the delivery of two Mineral Resource updates for Yaoure in H2 2014 and a PFS in Q1 2015 - the in-fill drilling campaign, engineering and metallurgical studies continues to progress on track
US$3 million bond is in place in Burkina Faso, which more than adequately provides for the rehabilitation of the Kalsaka/Sega site and facilitates the efficient closure of the operation - US$1 million of environmental rehabilitation work has already been completed
John McGloin, Chairman and Chief Executive Officer of Amara, commented: 'By the start of Q4 2014 it was anticipated that Amara would commence the process to close its local subsidiaries in Burkina Faso, so while this event has been accelerated, the ultimate outcome remains largely the same. The structure of the Company will be simplified and we will become an explorer/developer, with the true value within Amara remaining intact.
We made a commitment to our shareholders that funds raised would be applied to delivering value from Yaoure by improving the confidence of the resource estimate and project economics, and we remain committed to this objective.
The drilling programme at Yaoure is progressing to plan and we are focused on delivering two Mineral Resource updates in H2 2014 and a PFS in Q1 2015, which will further establish that the project has the potential to be one of the top 10 gold mines in Africa. We remain fully funded to demonstrate this. I'd like to thank Peter for his contribution to Amara and I wish him well with future endeavours.'
Amara Mining plc
Chairman and Chief Executive Officer
Tel: +44 (0)20 7398 1420
Peel Hunt LLP
Tel: +44 (0)20 7418 8900
GMP Securities Europe LLP
Tel: +44 (0)20 7647 2800
Farm Street Communications
Tel: +44 (0)7593 340 107
Note to Editors
Application for creditor liquidation
SMSA, the exploitation company responsible for production at the Sega deposit, is not able to pay its creditors in a timely manner due to the underperformance of the Sega deposit compared to the original mine plan and the significant level of working capital tied up in the heap leach.
During H1 2014 Kalsaka/Sega produced 31,030 ounces of gold; 714kt of ore was mined at a strip ratio of 5.8:1, however the head grade was materially lower than anticipated in the resource model (1.9g/t) at 1.3g/t. This was due to the high grade portions of the Sega ore body being overstated.
BCM issued SMSA with a default notice as a result of delayed payment for mining services and notification was received on 4 August 2014 that BCM intended to cease mining. Negotiations on 5 August 2014 did not result in a positive conclusion and mining has now ceased.
Prior to the cessation of mining, BCM applied to a court in Burkina Faso to prevent a Kalsaka/Sega gold shipment from leaving Burkina Faso. As a result of SMSA's inability to export its gold, SMSA has applied for creditor liquidation. No further cash will be invested into SMSA or KMSA by Amara.
If mining had continued until late August 2014 and production had been allowed to continue until Q1 2015 as scheduled, Amara's management team believes that there would have been sufficient gold within the remaining mine plan, stockpiles and heap leach pads, which together with the recovery of taxes from the Burkina Faso government would ensure the settlement of all outstanding creditors.
However due to the leach cycle and the time it takes to release working capital from a heap leach operation, the money to repay SMSA's debt to BCM is not available at present.
Amara's other operational subsidiary in Burkina Faso, KMSA, which owns and operates the Kalsaka processing plant, is not affected by the default notice and management are continuing to work on scenarios to unlock the latent value of the Kalsaka processing plant and operational team. The management team believes its focus must be to ensure that the working capital locked up at Kalsaka/Sega is released efficiently for the benefit of all creditors.
The premature cessation of production will not materially affect Amara's financial position and management believes there is no basis for any legal recourse against Amara Mining plc.
About Amara Mining plc
Amara is a gold developer with assets in West Africa. Amara is focused on unlocking the value in its development projects. At Yaoure in Cote d'Ivoire, this will be done by increasing the confidence in the existing Mineral Resource and economics at the project as the Company progresses it through to Pre-Feasibility Study and Bankable Feasibility Study.
At Baomahun, this will be achieved by gaining an improved understanding of the exploration upside potential and underground opportunity. With its experience of bringing new mines into production and a project pipeline spanning three countries, Amara aims to further increase its production profile with highly prospective opportunities across all assets.
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