All that glistens is not golden so the old adage says – just ask the shareholders in WA gold miner Gascoyne Resources which collapsed yesterday, less than a month after raising more than $24 million from shareholders to help try and revamp its troubled Dalgaranga operation.
Gascoyne, (https://www.gascoyneresources.com.au) operates the underperforming Dalgaranga gold mine near Mt Magnet in the WA goldfields and went into a trading halt last Thursday citing a pending production update.
Directors of the company called in administrators from FTI Consulting on Sunday before resigning with senior management. In a statement on Monday via FTI Gascoyne said it was facing a material cash flow shortage in the next six months because of continued difficulties at Dalgaranga.
“Although Gascoyne has identified options to address that cash flow shortfall, through obtaining financial accommodation from creditors and shareholders, it has become apparent that those options will not successfully address the cash flow shortage,” it said.
“As a consequence, the directors have determined to appoint voluntary administrators.”
The shares had been trading at 3.9 cents last Thursday when the halt was applied for and granted. That valued the company at $20.6 million, 70% down on the value a year ago.
The appointment leaves shareholders with worthless paper, especially those who took up the latest raising from brokers Hartleys and Argonaut Capital.
Gascoyne said the proceeds from the heavily discounted $3.8 million placement and four-for-five $20.6 million rights issue at 5 cents a share finalised last month would be used to improve the performance of Dalgaranga.
The mine came online 13 months ago but has struggled to turn out the expected quantity of gold because of what Gascoyne said was “poor reconciliation of geological models”.
The company reported a loss of $33 million for the December 2018 half which included a $47 million write-down of the project.
In yesterday’s statement FTI statement, the company said its consultants had come up with a new model at the end of May for mining Dalgaranga (which was put the board on May 28).
“The new model, although supporting the global gold inventory, defines a higher tonnage lower grade deposit than previous resource models. On the basis of the new LUC model, and urgently prepared pit mining schedules based on the new model, high-level cash flow analysis indicates that due to lower predicted grades, particularly in the next 6 months, GCY will incur a material cash flow shortfall in the short term,” the company said.
“Although GCY has investigated options to address that cash flow shortfall, through obtaining financial accommodation from creditors and shareholders, it has become apparent that those options will not successfully address the cash flow shortfall in the time available.”
FTI said Dalgaranga would remain in operation while it explores a recapitalisation.
