Photo by: Bloomberg
PERTH (miningweekly.com) – The share price of ASX-listed Kin Mining plunged 40% on Wednesday as the company announced that it had curtailed construction work at the Leonora gold project, in Western Australia, on fears of a cost blow-out.
The junior on Wednesday told shareholders that the decision was necessitated by an expected increase in the existing pre-production capital cost estimate of A$35.4-million, after a review process of key aspects of the Leonora project found that the capital cost estimate in the 2017 definitive feasibility study would have to be adjusted.
Kin said that had the company continued with the development of the Leonora project, the potential scope of increase in capital costs would have necessitated ta “significant” capital raise to fund the increased costs, as well as expected exploration and corporate costs.
A comprehensive review of Leonora would now be undertaken to ensure that before full project development resumed, the company had a high degree of confidence in key project parameters, cost and time estimates, as well as a clear and certain funding path to complete the construction of Leonora.
To date, Kin has spent some A$5.9-million to develop the Leonora gold project, with a further A$3.1-million committed. The committed work items include work on the carbon-in-leach tank construction, concrete foundations and bridging steel work.
Kin has maintained its confidence that the Leonora project holds significant value, pointing out that the project hosted a resource base of over one-million ounces of gold and is located within a highly endowed and operationally active Leonora gold region.
Once operational, the project will produce 372 000 oz of gold in its seven-year operating life, averaging 55 000 oz/y.
While the review is under way at Leonora, Kin will continue with its targeted exploration programme, and is planning to complete its search for a new MD, after Don Harper resigned from the position in February this year.
Kin’s share price fell 40% to A$0.155 apiece as investors reacted to the news.