The “turnaround plan” for a struggling Red Lake gold mine may include a sale of the company and its underground operation in northwestern Ontario.
PureGold Mining has initiated a strategic review process that could involve a potential sale or merger of the company, a sale of all or part of its mine, or other long-term financing options.
It's been a steep decline for the Vancouver-based mining startup company.
Amidst high hopes in 2021, the PureGold Mine entered commercial production last August on the site of the former Madsen Mine, located a few kilometres southwest of the town of Red Lake.
But by the fall months, the operation began falling short of gold production targets, particularly on the high-grade ore side.
These shortfalls were blamed on underground mine construction delays, bad scheduling, “insufficient geological information” for the stopes about to be mined, equipment issues, and “strategic misalignments," resulting in a change of senior management. The year-end financials showed a $34.9-million loss
The new team that’s been installed are under orders to get the most out of an underperforming mine.
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In a July 12 news release, the Vancouver company cautioned no decisions, regarding the strategic review, have been made at this time and further offered that there are no guarantees that anything will come out of this exercise.
PureGold has not disclosed how long this process will take.
In an effort to achieve a positive cash flow position by the third quarter of this year, some drastic cost-cutting measures were taken a few months ago to reduce jobs (from 340 employees down to 275), equipment and spending at the site.
The company needs additional time and money to make this “operational turnaround plan” work.
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Pure Gold recently raised $31 million to help carry out this plan and on July 12 announced it’s secured a US$6-million loan from Sprott Resource Lending Group as well as rescheduling payments from an earlier loan to free up $12 million in additional cash to give the company some much-needed financial flexibility.
On the operations side, the company is conducting a 60,000-metres infill drilling program and is proceeding on a six-month mine plan in an attempt to get things back on track to consistently produce as an 800-tonne-per-day operation.
An updated gold resource and reserve estimate is due out by the end of this year, along with a new life of mine plan.
“We have initiated a strategic review process to explore potential alternatives for maximizing shareholder value and generating the financial strength to allow the PureGold Mine to achieve its potential,” said Mark O’Dea, PureGold’s president-CEO in a statement.
“We remain focused on achieving positive site-level cash flow by Q3 2022, and delivering an updated NI 43-101 Technical Report and Life of Mine plan by Q4 2022. If we can maximize the value of the mine, we can also maximize value for our stakeholders, including but not limited to our shareholders, employees, and the local communities surrounding Red Lake.”
Don’t expect much more in the way of comments from the company until its board of directors decide it’s ready to announce a course of action from this review or has something it deems important to disclose.
