JOHANNESBURG (miningweekly.com) – LSE-listed Avocet Mining’s share price fell by 38.5% on Thursday as it announced that it would temporarily suspend operations at its Inata mine, in Burkina Faso.
This followed the seizure of a 1 400 oz gold shipment by bailiffs acting on behalf of former employees of Société des Mines de Bélahouro (SMB), who had been laid off following an illegal strike in December 2014.
Avocet, which owns 90% of SMB, which, in turn, owns the Inata mine, said in a statement on Monday that the legal basis for the seizure was, according to representatives of the former employees, a number of unpaid benefits which remain outstanding.
The company on Thursday said in a statement that, given the potential threat of the further seizure of gold shipments before a court case, which was due to be heard on November 7, it would not be economically viable to continue.
A skeleton crew will remain on site to ensure that the mill is properly maintained to guarantee a smooth restart once a resolution to the current situation has been found and it is appropriate to do so.
A prolonged cessation of operations may mean that the mine cannot be restarted without significant investment, if at all, and will likely have a material adverse effect on both SMB's and Avocet’s financial position.
In particular, funding will likely be required to support the company's head office operations ahead of the completion of the current Tri-K transaction, which will result in the receipt of an initial consideration of $4-million.
However, meetings are due to be held in Ouagadougou, the capital of Burkina Faso, in the coming days, between representatives of the mine, its workforce, and government officials, to try to find a resolution to the situation and to avoid a prolonged cessation.
If funding is required before completion of the Tri-K transaction and such funding is not available from Inata, or the company is unable to secure alternative funding, the company will likely enter an insolvency process in which case it is highly unlikely that any value will remain for shareholders, Avocet cautioned.
Total gold production at Inata for the quarter to September 30 was 17 694 oz at a cash cost of $1 047/oz, compared with the 21 086 oz produced in the second quarter at a cash cost of $903/oz.
The company’s share price fell to 43.25p on Thursday, down 38.5% on Wednesday’s close of 70.38p. Its shares later rebounded somewhat to 49.75p.