Red 5 warns of further impairments
PERTH (miningweekly.com) – Gold miner Red 5 has warned of a noncash impairment of between A$28-million and A$30-million on the carrying value of its Siana gold project, in the Philippines.
The impairment charge, expected to be recorded in the June year-end, will be in addition to the A$70.4-million expense recorded in the half-year ended December.
Red 5 said on Thursday that the impairment charges related to the suspension of mining operations at the Siana mine in April, as well as an increased weighted average cost of capital discount rate, considering the increased sovereign risk for mining in the Philippines.
The decision to suspend mining operations at Siana was taken on the back of uncertainty around regulatory and government mining policy and the group’s assessment of the likely resulting changes to openpit operations after taking into account the delays in the approval of the environmental compliance certificate amendment for the long-term tailings storage facility, and other mining challenges.
The miner said that it was continuing to closely monitor political and regulatory developments in the Philippines, with the expectation that the company could either restart gold production from Siana in the future, providing a second production center alongside the Eastern Goldfields project, or pursue other strategies to maximise the value of the large resource inventory and infrastructure base in the Philippines.
Meanwhile, Red 5 shareholders have backed the acquisition of the Darlot and King of the Hills gold projects, in Western Australia.
The company in August unveiled plans to acquire the Darlot gold mine from South Africa’s Gold Fields for a total consideration of A$18-million and the acquisition of the King of the Hills project, from Australian miner Saracen Mineral Holdings for A$16-million.
The acquisition of the two projects forms part of a new growth strategy in the Eastern Goldfields region, under which Red 5 aims to maximise throughput at the Darlot mill over an initial three- to four-year period, by processing ore from both the Darlot and King of the Hill mines.
Stage 2 of the strategy will centre on increasing the reserve base in the Eastern Goldfields through regional exploration within the 25 700 ha tenement footprint acquired under the Darlot and King of the Hill transactions, as well as assessing additional business development opportunities.
With shareholder approval in place, the Darlot and King of the Hills transactions are scheduled for completion on October 2.
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