Aim-listed Goldplat reported an operating loss of £653 000 for the six months ended December 31, 2018, compared with an operating profit of £1.5-million for the six months ended December 31, 2017.

Production of gold and gold equivalents during the reporting period was 15 786 oz, compared with 20 246 oz in the prior comparable period, which was below the yearly forecast.

All operations, in South Africa, Ghana and Kenya, reported lower production, owing to the poor first quarter at both recovery operations and planned production decreases at Kilimapesa, in Kenya. 

The poor first quarter at the recovery operations reflected difficulties at Gold Recovery Ghana (GRG) in sourcing sufficient material and challenges at Gold Recovery (GPL), in South Africa, in sourcing the required quality material during the period.

“GPL recovered well from a poor first quarter and has returned to normal levels during the second quarter with both the by-product section and the carbon-in-leach section performing well.  This performance is attributable to deliveries from clients returning to normal levels and management’s efforts to turn over gold inventory stocks that had accumulated over a period.

“GRG performed below plan despite production improvements during the second quarter and reported a loss for the six-month period.  Production increased during the second quarter as established clients in Ghana made deliveries of material and additional material was sourced from South America,” Goldplat reported on Monday.

The company added that the plant continued to run below capacity during the second quarter and, despite the improvement, the losses from the first quarter could not be recovered.

Substantial gold-bearing material suitable for treatment at the Ghana plant has been identified at the operations of a major producer in West Africa. A trial batch of this material will be processed once export logistics and legalities have been finalised. 

A successful outcome of this trial will secure another stream of material for the Ghana operation.

Meanwhile, Kilimapesa continued to report losses despite a significant decrease in costs at the operation. This can be seen in the mining and exploration segment loss before tax of £836 000, compared with an £81 000 loss in the prior period, of which £292 000 in the reporting period related to depreciation and amortisation.

Plans to put Kilimapesa on care and maintenance have been put on hold while discussions regarding financing of the operation is in progress.

Since October, a strategy was followed to reduce production, improve grades and decrease the overall cost of running the operation.  This strategy envisages that losses can be kept below the cost of care and maintenance, while the company is progressing a possible transaction to secure funding.

“The decrease in production and consequent poor financial performance at both the recovery operations in this period has highlighted the difficulties inherent in these businesses, including an unpredictability in the supply of material from existing clients (reflecting the mature nature of the gold mining industry in South Africa and Ghana), and the time required to secure new clients in new markets and then overcome country logistics and regulatory issues. 

“The amount of working capital required to secure contracts in new markets, as well as to manage the continued pressure on credit cycles, also grows,” said Goldplat.

Focus on sourcing is key to mitigating the risks at the recovery operations. Senior management continues its comprehensive and planned strategy to identify potential sources of material, engage with the relevant producers and regulatory authorities and advance contract negotiations, the company added.

Client and geographic diversification are key to improving the visibility of supply of material and, hence, earnings from the recovery business.

Meanwhile, GPL’s process to secure West Pit 3 for tailings deposition continued to be frustrated by various stakeholders. The company is still awaiting finalisation from the Department of Mineral Resources before GPL can move forward and finalise design and other requirements for the deposition.

Chairperson Matthew Robinson remains confident that operating activities will improve and that initiatives in South America and across the wider African gold-producing areas remains encouraging, despite delays.