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Major Beadell shakeup targets $100m cost savings

16th July 2018

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Gold miner Beadell Resources has implemented major management changes and cost reductions at its Tucano mine, in Brazil, that could save more than $100-million.

CEO and MD Simon Jackson and COO Peter Holmes will step down from their current positions, with Dr Nicole Adshead-Bell taking over as CEO and MD.

Adshead-Bell is a geologist with over 20 years of capital markets and minerals sector experience, and has been a nonexecutive director of Beadell since September 2016.

The current GM of the Tucano gold mine, Luis Pablo Diaz, has now been appointed country manager, with the current tailings dam manager at Tucano, Fabio Marques, assuming the role of GM for the operation.

Beadell’s current chairperson, Craig Readhead has also stepped down from his role, but will remain as a nonexecutive director. Beadell director, Brant Hinze, who is a resident in the US, will replace him.

Meanwhile, Beadell on Monday announced that the company had executed a life-of-mine contract with Brazil’s largest mining contractor, U&M Mineracao e Construcao, which is expected to result in cost savings of about $100-million.

Beadell in June terminated a contract with contract miner MACA over the Tucano gold project, in the hopes of delivering operational efficiencies and reduced mining costs.

Under the agreement U&M will be paid on a 100% volume basis contract, that will give mining unitary cost predictability, simplifying the contract, mine management and administration.

The move is also expected to reduce administration costs by around $1-million a year, compared with the MACA contract.

“We are pleased to have reached an agreement with U&M that we believe will materially improve the financial performance of the Tucano gold mine,” said Adshead-Bell.

“U&M’s Brazilian openpit mining expertise, combined with its sizeable fleet, means that U&M is uniquely positioned to help us move Tucano towards generating free cash flow and resolving key issues of material movement in line with our life-of-mine plan.”

Adshead-Bell said that this, in turn, would allow Beadell to shift focus towards extracting value from its exploration activities, including multiple in-mine and near-mine discoveries that are not in a resource or reserve category.

In addition to the contract miner cost savings, the removal of the COO position is also expected to result in cost savings of about A$597 247 a year. In addition, Beadell will also rationalise its Rio de Janeiro offices, reducing the head count from 14 to 4 and removing one position at the Tucano gold mine, resulting in cost savings of around A$700 000 a year.

CEO and MD cash compensation will also be reduced by around 52%.

Meanwhile, a planning, budget and cost committee has also been established by the Tucano mine management to identify additional cost reduction opportunities.

The focus has been on leveraging off existing systems used in the company to develop operational parameters that have accountability and can be measured on a timely basis to ensure alignment with near-, medium- and long-term objectives.

Furthermore, the company has also terminated the project management contract for the Tucano plant upgrade project, on the basis of a repudiatory breach of contract by the contractor, with the Tucano site personnel now assuming responsibility for completing the project.

“We acknowledge that Beadell has underperformed in terms of cost and production guidance. In the opinion of the board and management, the key contributing factor to this underperformance has been an inability to mine waste and ore tonnes at the forecast rates assumed in the mining contract executed by the predecessor management team in November 2014,” said Adshead-Bell.

“The ripple effect of a continual shortfall in material movement resulted in lower mined ore tonnes available to the plant. This was supplemented by low grade stockpiles and spent ore, resulting in a head grade that was materially lower than reserve grade, thereby negatively impacting production and revenue.”

She said that the relatively high fixed price component of the mining contract meant that unit mining cost increased as material movement declined.

The company mobilised a second mining contractor in 2017 to try and meet budgeted material movement, which increased mining rates at a cost of around 36% less per tonne of material moved, when compared to the unit cost under the then existing mining contract.

However, it also resulted in an additional cost burden, prompting Beadell to terminate the mining contract with MACA.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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