Cost Blowout Halts Kin Mining
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Shares in Kin Mining lost 40% of their value yesterday after the company called a halt to its $35 million Leonora gold mine because of cost overruns.
The shares slumped to 15.5 cents at the close but were down more than 48% at one stage.
Its another example of how the market hates unexpected shocks.
The value of the company fell to just under $58 million, but the company is looking to raise more than $10 million to help repair its finances.
Kin told the ASX yesterday (https://www.kinmining.com.au/wp-content/uploads/2013/10/Leonora-Gold-Project-Update.pdf) it would curtail works at Leonora pending a full review of capital costs and schedule for completion.
The decision will almost certain to delay the 55,000oz a year project, which had been scheduled to deliver its first gold in December.
Kin said the review by Como Engineers aimed to shore up the scope, cost and schedule around Leonora and ensure the company had a clear and certain funding path in place to complete it.
The company flagged an $11 million capital raising to meet its liabilities for the next six months while the review is completed.
“The board assures all Kin shareholders that it will seek to structure any proposed equity component of this planned funding in a manner that is as fair and minimally dilutive as possible,” the company said in a statement.
Kin said it had spent $5.9 million on the project to April 9 with another $3.1 million in works already committed.
The company said it was in talks with its lender, Canada’s Sprott Resource Lending, having drawn down $5 million of a $35 million debt facility announced in December.
“In the near term the Company will be seeking to raise approximately A$11 million of new funding. Together with its existing cash balance of approximately A$7.7 million (as at 9 April 2018), this is expected to enable Kin to fund its current liabilities (including potential repayment, if necessary, of the drawn amount under the Sprott facility), curtailed construction works, review costs, exploration programme and corporate overheads for the next 6 months.
“Shareholders will be informed of how this new funding will be sought once these details have been finalised,” director assured shareholders..
The project review follows a boardroom argument at Kin in February, which saw the departure of managing director Don Harper and technical director David Sproule.
Media reports said the resignations were prompted by a group of shareholders, including former board members Terry Grammer and Marvyn Fitton as well as Orbit Drilling who moved to oust Mr Sproule.
"Following the recent changes to the composition of Kin’s Board, a review process of key aspects of the Leonora Gold Project was commenced pursuant to which it has become apparent that the Definitive feasbility Study estimate of pre-production capital costs will need to be adjusted, “ director said.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.