LONDON (Alliance News) - GoldBridges Global Resources PLC Friday said it swung to a pretax loss in the first half of the year after lower gold prices and a substantial drop in production hampered revenue as the company moves further underground at its mine in Kazakhstan.
The company said its plans to move underground at the mine will cost around 50% less than previously thought as it aims to produce more than ten times more gold than it is currently producing by 2018.
The gold miner reported a USD462,000 pretax loss in the first six months of 2015 after swinging from a USD2.7 million profit a year earlier after revenue declined to USD12.8 million from USD16.7 million and it was hit by administrative expenses rising to USD4.1 million from USD3.3 million.
Revenue was hit by lower gold prices and a large reduction in production that was "in line with expectations", it said.
Gold production in the first half dropped to 8,823 ounces of gold from its Sekisovskoye mine in Kazakhstan from 12,694 ounces, and the company had to mine more ore to achieve that lower production rate.
It is mining more ore because the company is expanding the mine from an open pit operation into an underground mining operation. To put progress into context, ore from underground mining contributed 17% of the ore in the first half, compared to only 8% last year.
In the second half, the miner will close the open pit operation and the mine will be completely focused on its underground operation. The company said it has 60,000 tonnes of ore stockpiled to be treated in the second half to supplement production as the open pit closes.
"Our operational priority will remain to continue to increase production from the underground mine as we move towards our target of producing 100,000 ounces of gold annually by 2018," said GoldBridges in a statement.
That underground development has a recognised estimate of probable reserves totalling 2.3 million ounces of gold at a grade of 4.09 grammes of gold per tonne of ore, with indicated and inferred resources potentially adding another 5.1 million ounces.
That move into underground mining was expected to cost the company around USD130 million originally, mainly to sink a shaft to access the gold reserves, but the company said it is optimising the studies to bring the capital expenditure down as much as possible whilst maintaining the target to produce 100,000 ounces of gold a year in 2018.
One major change it is looking to do is access the reserve base by a decline rather than take the "more traditional shaft-sinking approach" which could reduce its initial capital investment by around half, it said.
By accessing the reserves by a decline, the company could use underground haulage trucks to transport product from the mine to the ground level, which the miner said was "a commonly used and well proven method around the world" that is used to extract deposits at other mines that are similar to Sekisovskoye.
However, the company can not fully carry out its plans without further financing and the company is in further discussions with major shareholder African Resources, which has indicated it will provide financing to cover the company's capital requirements "if necessary."
In the half, it spent USD4.1 million in capital expenditure on the mine, which was much lwoer than the USD18.5 million spent a year earlier.
"The company is in detailed discussions with other parties regarding potential financing for completion of the expansion, and will continue these discussions. However, with African Resources' commitment to fund some or all of the underground expansion project, the company has already intensified its underground expansion activities and is confident in project development," it said.
GoldBridges currently has a cash balance of USD2.3 million.
The move into underground mining will also hit production in the short term, and the company warned production for the full year "may experience a reduced output" compared to 2014. The company said it is more focused on the medium and long-term prospects of the operation and is willing to take a short term hit to achieve that goal.
Additionally, it managed to reduce its cash costs to USD682 per ounce from USD744 per ounce a year earlier and said the recent devalution of the tenge is expected to bring "significant operating cost benefits" to the company.
It also said it has made a decision to write back the previously booked provision made against recoverable VAT and that this will have a positive cashflow impact in the second half of 2015.
GoldBridges shares were down 5.2% to 2.11 pence per share on Friday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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