Strategic review process initiated & senior management changes
implemented VANCOUVER, Aug. 15, 2012 /CNW/ - Great Basin Gold
Limited ("Great Basin Gold" or the "Company"), reports unaudited
results for the three and six months ended June 30, 2012 and other
material corporate developments. Executive Summary Due to technical
and infrastructure issues at both principal projects, the Company's
mining operations underperformed in the second quarter. As a
result, Great Basin Gold lost $0.05 per share on revenues of $32.4
million. Revenue shortfalls were primarily due to delays in on-reef
ore development and water management problems at the Burnstone Mine
and delays in accessing higher grade stopes at the Hollister trial
mining project. Because of the revenue shortfalls, the
Company faces a near-term liquidity challenge. The Board has formed
a special committee to consider strategic alternatives, including
asset divestitures, equity financing, bank refinancing, and other
possibilities that are discussed below. The Company has
implemented an aggressive further cost reduction program involving
off-site and corporate overhead costs and is also working with its
lenders to seek to restructure the current term loan facilities to
improve the Company's cash flow in the near term. In light of the
production issues, the Company has again reviewed the carrying
value of the Company's two projects, including with independent
technical consultants retained by the lenders. The Board has
concluded that no impairment charge to the carrying value of the
Burnstone mine ($653 million) or the Hollister trial mining project
($126 million) is currently warranted. In other corporate
developments, Mr Ferdi Dippenaar has resigned as the Company's
President and Chief Executive Officer, and a director, effective
immediately, and Mr Lou Van Vuuren, the Company's Chief Financial
Officer has been appointed interim Chief Executive Officer and a
director. Patrick Cooke, a director of the Company and audit
committee chair, will temporarily serve as unremunerated interim
Chief Financial Officer and the audit committee will be
reconstituted during this period. The Company believes that the
technical and infrastructure issues that lead to this quarter's
unexpectedly poor operating performance are substantially behind
it, and forecast combined production for the remainder of 2012 to
be in the range of 58,000 to 68,000 Au eqv oz. Combined Operations
_____________________________________________________________________
| | 3 months ended | 6 months ended | |
|____________________________|___________________| | | June 30|
March 31| June 30| June 30| June 30| | | 2012| 2012| 2011| 2012|
2011|
|____________________|_________|_________|________|_________|_________|
|Recovered Au eqv oz1| 21,080| 22,911| 31,651| 43,990| 61,244|
|____________________|_________|_________|________|_________|_________|
|Au eqv oz sold | 20,473| 21,555| 40,141| 42,028| 60,259|
|____________________|_________|_________|________|_________|_________|
|Realized Au eqv | $1,581| $1,548| $1,413| $1,564| $1,379| |price |
| | | | |
|____________________|_________|_________|________|_________|_________|
|Revenue ($'000) | $32,371| $33,373| $56,738| $65,744| $83,081|
|____________________|_________|_________|________|_________|_________|
|(Loss) profit from |($19,641)| ($7,650)| $6,808|($27,291)| $6,431|
|operating activities| | | | | | |($'000) | | | | | |
|____________________|_________|_________|________|_________|_________|
|Net (loss) profit
|($21,990)|($17,770)|($1,051)|($39,760)|($21,392)| |($'000) | | | |
| |
|____________________|_________|_________|________|_________|_________|
|Adjusted loss per | ($0.05)| ($0.03)| ($0.00)| ($0.08)| ($0.02)|
|share | | | | | |
|____________________|_________|_________|________|_________|_________|
(1) Gold equivalent ounces calculated using metal price of
US$1,400/oz for Au and US$30/oz for Ag. Hollister A total of 23,720
tonnes (Q1 2012: 21,142 tonnes) were trial mined at the Company's
Hollister operation in Q2 2012, yielding 14,857 gold equivalent
contained ounces (Q1 2012: 20,459 Au eqv oz). Although tonnage
mined was only slightly below planned levels, a lower-than-plan
mining grade of 0.63 Au eqv oz/t (Q1 2012: 0.97 Au eqv oz/t)
resulted in a lower than planned recovery of 14,688 Au eqv oz in Q2
(Q1 2012: 16,240 Au eqv oz). The high-grade nature of the Hollister
ore body can lead to quarterly grade fluctuations, which are
evident when comparing the average grade of1.35 Au eqv oz from
production in Q2 2011 to the average grade of 0.63 Au eqv oz/t from
production in Q2 2012. In order to counter decreasing grade
trends, efforts in the current (third) quarter are being focused on
decreasing stope width and controlling dilution; early indications
are that up to 20% reductions in stope widths are achievable. Long
hole stoping accounted for approximately 11% of production during
the period and is considered the main contributor to the excessive
dilution. Current mine planning suggests an increase in grade
for the remainder of the year as a result of higher-grade stopes
being available for mining. The Company is currently updating its
mine plan in conjunction with updating reserve estimates which may
impact production estimates going forward. During the first half of
2012, Hollister experienced challenges in mining flexibility due to
the lack of available working stopes as well as a high rate in
turnover of personnel. Development for the quarter was focused on
providing access to the Upper Zone for additional delineation
drilling, infrastructure construction, and accelerated production
from higher-grade mining areas. During the quarter, the Esmeralda
Mill at 93% availability processed 25,811 dry tonnes during the
quarter (Q1 2012: 20,042 tonnes) and achieved recoveries of 90% and
59%, respectively, for gold and silver (Q1 2012: 87% Au and 62%
Ag). Work on the acid wash and carbon regeneration circuit was
completed during June 2012 and all doré is now being poured on
site. A total of 14,863 Au eqv oz were sold during the quarter (Q1
2012: 15,357 Au eqv oz). Au eqv oz recovered but not sold decreased
by 2,239 Au eqv oz to 12,208 Au eqv oz from the previous quarter.
Cash costs of $983 per Au eqv oz were recorded for the quarter (Q1
2012: $850 per Au eq oz); cash costs were negatively impacted by
the lower mining grade as well as the additional transport costs
incurred to process the carbon at Rand Refinery in South Africa.
Burnstone Technical challenges at the Burnstone mine continued in
the second quarter with the temporary service water handling system
failing to provide for the increasing mining areas during May and
June, which severely affected production levels. Development and
stoping activities were constrained due to the limited supply of
service water. Although a temporary solution was implemented by
early June, and production and development levels in July were back
to levels achieved at the end of 2011, quarterly targeted levels
for development and stoping were not met and this will have a
related negative impact on production targets for the remainder of
the year. As a result of the infrastructural challenges, the
Burnstone operations produced 6,392 Au oz in the quarter (Q1 2012:
6,671 Au oz), compared to the forecast of 17,790 Au oz; however,
good progress is being made with the completion of the permanent
water handling system, which is expected to be commissioned during
the September quarter and reduce the risk of production
interruptions related to service water supply. Good progress was
made during the quarter on vertical shaft and other infrastructure
construction that will enable the mine to regain its momentum in
meeting the increasing development and production targets. Cash
costs of $2,325 per oz for the quarter were recorded (Q1 2012 :
$2,182 per oz) and were impacted by the low head grade of material
delivered to the mill but due to the low volumes from the delay in
ramp-up these costs are not yet considered meaningful relative to
post-ramp-up (steady state) production cost estimates. Steady state
production is not expected to be achieved until 2014. The Company
plans to implement a number of near-term steps to enable a
turnaround at Burnstone. The Company believes it will be able to
reduce costs through reduction of off-site supervisory and premises
costs and improvements to the use of labour and water-handling.
These actions could result in aggregate cost reductions in the
range of ZAR20 million ($2.5 million) per month after a few months.
Based in part on discussions with the Snowden Group, the
independent technical advisors retained by the Company's lenders,
Great Basin Gold's management currently estimates production of
30,000 Au oz in 2012 and 90,000-100,000 Au ounces in 2013.
Financial Results and Corporate Matters Revenue of $32 million was
recorded for the quarter, a decrease of 44% over the comparative
period in 2011. The decrease in revenue can largely be attributed
to the decrease in ounces sold from the Company's Nevada operations
which had sold a record amount of metal Q2 2011 as a result of
exceptionally high-grade material produced during that quarter as
well as settlement for some ounces recovered in Q1 2011. The
increase in cash and non-cash costs had a negative impact on the
loss from operations which came to $20 million (Q2 2011: $7 million
profit). A further $1.4 million impairment charge arising from the
loan advanced to our South African BEE partner (Tranter) was
recorded. The guarantee has now been fully called upon and the
monies loaned by Great Basin Gold to Tranter and, in turn, paid by
Tranter to its banker, Investec, have been written down to a
nominal value in the Great Basin Gold accounts. The operational
performance from the Nevada and South African operations resulted
in a working capital deficit of approximately $23 million on June
30, 2012. Strategic Review Process The Company's Board of Directors
has recently initiated a review process to consider a range of
strategic alternatives with a view to preserving and enhancing
shareholder value in light of continued financial challenges from
the operational difficulties experienced, particularly with the
production ramp up at the Burnstone mine. Strategic alternatives
are likely to include, but are not limited to, the sale of all or a
portion of the Company's assets, a merger or other business
combination transaction involving a third party acquiring all of
the Company, a capital raising, sale of royalties or metal streams,
recapitalization, reorganization, or restructuring of the Company,
as well as continued execution of the Company's existing business
plan, or some combination of these alternatives. A special
committee ("Special Committee"), consisting of independent
directors, Ron Thiessen, Patrick Cooke, Anu Dhir, Barry Coughlan
and Philip Kotze, has been appointed to oversee the strategic
review process. CIBC World Markets Inc. ("CIBC") has been retained
as financial advisor to the Board. As part of this strategic review
process the Company's President, Chief Executive Officer ("CEO")
and director, Mr Ferdi Dippenaar has resigned and Mr Lou Van
Vuuren, the Company's Chief Financial Officer ("CFO") has been
appointed as Interim CEO and director, both with immediate
effect. In addition, Patrick Cooke, a director of the Company
and the audit committee chair, will temporarily serve as
unremunerated Interim CFO. Great Basin Gold has also implemented an
aggressive cost reduction program and is also working with its
lenders to potentially restructure the current term loan facilities
to improve the Company's cash flow in the short to medium term. The
Special Committee currently intends to seek to raise, through a
combination of asset sales or new equity, a minimum amount of $60
million to relieve the near and intermediate liquidity concerns. It
is the Company's current intention not to disclose developments
with respect to the strategic review process unless and until the
Board of Directors has approved a specific transaction or otherwise
determines that disclosure is necessary or appropriate. Investors
should be aware that financing will be solicited on terms the
Company cannot currently predict and that a transaction could be
announced at any time. The Company cautions that there are no
assurances or guarantees that the process will result in a
transaction or, if a transaction is undertaken, as to the terms or
timing of such transaction. Great Basin Gold Chairman Ron Thiessen
commented: "The water infrastructure setbacks at our Burnstone mine
and the slower access to higher-grade stopes at Hollister converged
at a difficult time and have created a near-term liquidity
challenge for the Company which the Special Committee and CIBC will
need to address as a priority. While the Board believes in the
underlying value of the Company's two principal gold projects, our
current financial situation requires that we will investigate all
potential liquidity sources. As our financial situation and the
results of our Strategic Review process may require us to institute
material changes in the Company, the Board felt changes in the
executive suite were necessary. Mr Dippenaar oversaw the
development of the Company's two gold mining projects during a
period which witnessed the worldwide financial crisis, skyrocketing
capital cost and other challenges which the Company ultimately
overcame. We thank him for his dedication and wish him well in his
future endeavours. Mr Van Vuuren has been Great Basin Gold's CFO
since 2008, has long-term relationships with the Company's lenders
and understands every facet of the Company's operations. He will be
of key assistance to the Special Committee and we welcome his
assumption of duties as Interim CEO." Lou van Vuuren Interim CEO
Shareholders of the Company are reminded that they may request a
hard copy of the complete audited financial statements free of
charge upon request from any of the Investor Services personnel
above or from the Company's Corporate Office at Tel: +27 (0) 11 301
1800, Fax: +27 (0) 11 301 1840 or Email: info@za.grtbasin.com. This
document contains "forward-looking statements" that were based on
Great Basin Gold's expectations, estimates and projections as of
the dates as of which those statements were made. Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as "outlook", "anticipate",
"project", "target", "believe", "estimate", "expect", "intend",
"should" and similar expressions. Forward-looking statements are
subject to known and unknown risks, uncertainties and other factors
that may cause the Company's actual results, level of activity,
performance or achievements to be materially different from those
expressed or implied by such forward-looking statements. These
include but are not limited to: -- uncertainties and costs related
to the Company's exploration and development activities, such as
those associated with determining whether mineral resources or
reserves exist on a property; -- uncertainties related to
feasibility and sensitivity studies that provide estimates of
expected or anticipated costs, expenditures and economic returns
from a mining project; uncertainties related to expected production
rates, timing of production and the cash and total costs of
production and milling, all of which impact on project valuation;
-- uncertainties related to the ability to obtain necessary
licenses, permits, electricity, surface rights and title for
development projects; operating and technical difficulties in
connection with mining development activities; -- uncertainties
related to the accuracy of our mineral reserve and mineral resource
estimates and our estimates of future production and future cash
and total costs of production, and the geotechnical or
hydrogeological nature of ore deposits, and diminishing quantities
or grades of mineral reserves; -- uncertainties related to
unexpected judicial or regulatory proceedings; -- changes in, and
the effects of, the laws, regulations and government policies
affecting our mining operations, particularly laws, regulations and
policies relating to o mine expansions, environmental protection
and associated compliance costs arising from exploration, mine
development, mine operations and mine closures; o expected
effective future tax rates in jurisdictions in which our operations
are located; o the protection of the health and safety of mine
workers; and o mineral rights ownership in countries where our
mineral deposits are located, including the effect of the Mineral
and Petroleum Resources Development Act (South Africa); -- changes
in general economic conditions, the financial markets and in the
demand and market price for gold, silver and other minerals and
commodities, such as diesel fuel, coal, petroleum coke, steel,
concrete, electricity and other forms of energy, mining equipment,
and fluctuations in exchange rates, particularly with respect to
the value of the U.S. dollar, Canadian dollar and South African
rand; -- unusual or unexpected formation, cave-ins, flooding,
pressures, and precious metals losses (and the risk of inadequate
insurance or inability to obtain insurance to cover these risks);
-- changes in accounting policies and methods we use to report our
financial condition, including uncertainties associated with
critical accounting assumptions and estimates; -- environmental
issues and liabilities associated with mining including processing
and stock piling ore; -- geopolitical uncertainty and political and
economic instability in countries which we operate; and -- labour
strikes, work stoppages, or other interruptions to, or difficulties
in, the employment of labour in markets in which we operate mines,
or environmental hazards, industrial accidents or other events or
occurrences, including third party interference that interrupt the
production of minerals in our mines. Cautionary Note regarding
Non-GAAP Measurements Cash cost per ounce/tonne is a not a
generally accepted accounting principles ("GAAP") based figure but
rather is intended to serve as a performance measure providing some
indication of the mining and processing efficiency and
effectiveness of operations. It is determined by dividing the
relevant mining and processing costs including royalties by the
ounces produced/tonnes milled in the period. There may be some
variation in the method of computation of "cash cost per
ounce/tonne" as determined by the Company compared with other
mining companies. Cash costs per ounce/tonne may vary from one
period to another due to operating efficiencies, waste to ore
ratios, grade of ore processed and gold recovery rates in the
period. We provide this measure to our investors to allow them to
also monitor operational efficiencies. As a Non-GAAP Financial
Measure cash costs should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP. Adjusted loss per share is also a Non-GAAP measure and is
calculated by excluding the impact of certain fair-value accounting
charges and once-off transactions. We also make reference in our
disclosures to "working capital" which is also a Non-GAAP measure
and includes cash and cash equivalents, trade and other
receivables, current inventories, trade payables and accrued
liabilities. There is material limitations associated with the use
of such Non-GAAP measures. For further information on Great Basin
Gold, investors should review the Company's annual Form 40-F filing
with the United States Securities and Exchange
Commission www.sec.gov and home jurisdiction filings that are
available at www.sedar.com. Great Basin Gold Ltd. CONTACT: For
additional details on Great Basin Gold Ltd. and its goldproperties,
please visit the Company's website at www.grtbasin.com orcontact
Investor Services:Michael Curlook - Manager of IR and Corp Dev. -
1-888-633-9332Tsholo Serunye in South Africa - 27
(0)11-301-1800Barbara Cano at Breakstone Group in the USA -
1-646-452-2334
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