(Alliance News) - Shares in Ormonde Mining PLC plummeted on Wednesday, after the firm said it has struck an agreement to sell its 30% stake in a Tungsten mine in Salamanca, northwestern Spain, to American asset manager Oaktree Capital Management for EUR6 million.
The stock shed 62%, trading at 0.95 pence in London on Wednesday afternoon.
Ireland-based Ormonde said revenue at the Barruecopardo mine has been "substantially lower" than forecasts from a 2012 feasibility study. The asset is operated by Spanish mining firm Saloro SLU, which Ormonde has a 30% interest in.
Mining costs have also risen, Ormonde said, and the company has previously been forced to pursue debt financing agreements to cope with rising expenses at Barruecopardo.
Ormonde Chair Mike Donoghue said: "While the disposal of Ormonde's interest in the Barruecopardo mine will be a disappointment for many shareholders, the mine has encountered significant setbacks during its ramp-up operations, initially resulting in an additional EUR10 million funding requirement, addressed through an additional loan facility as announced in October 2019, and most recently a further funding requirement estimated by the company to be in the region of EUR12 million to EUR15 million."
In October, Ormonde said Saloro agreed a EUR10 million term loan with Oaktree Capital-managed funds. The 12-month term loan was to give Saloro more liquidity to establish mining operations in the Barruecopardo main orebody.
Tungsten prices have also weakened, with benchmark prices for ammonium paratungstate currently quoted between USD235 and USD245 per metric tonne unit, Ormonde reported. In the 2012 feasibility study assumed price an ammonium paratungstate price of USD350 per metric tonne unit.
Ormonde will seek shareholder approval for the disposal at an extraordinary general meeting on February 12.
The company said: "The Ormonde board of directors considers a cash exit from the company's minority interest at this time to be in the best interest of Ormonde shareholders under current circumstances and intends to unanimously recommend the disposal to shareholders."
By Eric Cunha; ericcunha@alliancenews.com
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