The Australian gold division of Toronto-listed company GBS Gold International Inc has been placed into voluntary administration after it defaulted under its current debt financing arrangements.
The Australian gold division of Toronto-listed company GBS Gold International Inc has been placed into voluntary administration after it defaulted under its current debt financing arrangements.
GBS Australia Pty Ltd and its Australian subsidiaries have today appointed Andrew Saker, Darren Weaver and Martin Jones of Ferrier Hodgson as administrators.
In a statement, the company said it had production issues and subsequently weaker cash flows from several mining operations in the Northern Territory.
GBS said claims by creditors have been delayed with the principal aim of allowing the Australian subsidiaries to be restructured and recapitalised with a view to being able to continue their business.
GBS Gold Australia is the latest in a string of gold and base metals company being placed in administration.
Earlier this year gold miner View Resources slid into receivership and subsequently de-listed from the ASX, while the Michael Kiernan-led Monarch Gold Mining Company Ltd was placed into administration after a poor performance from its Davyhurst mine.
Below is the full announcement:
GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") reports that its indirect wholly-owned subsidiary, GBS Gold Australia Pty Ltd ("GBS Australia"), has today appointed Mr. Andrew Saker, Mr. Darren Weaver and Mr. Martin Jones of Ferrier Hodgson as joint and several Voluntary Administrators of GBS Australia and its Australian subsidiary entities.
The appointment of the Administrators is required under Australian law following the recent degradation of GBS Australia's financial position and places control of the Australian subsidiaries in the hands of the Administrators.
Claims of creditors are delayed with the principal aim of allowing the Australian subsidiaries to be restructured and recapitalized with a view to being able to continue their business.
The appointment has arisen due to the Company being unable within the time required to secure appropriate financing for recapitalizing its Australian subsidiaries. The appointment constitutes an event of default under the Company's debt financing arrangements, including the existing C$46 million secured promissory note facility and secured Australian banking facilities.
The security arrangements give the secured parties certain rights and decisions with respect to the Company's assets. The amounts due under the promissory note facility have become repayable and discussions have commenced with the noteholders. The Administrators are making immediate contact with the Company's noteholders, banks and other creditors and, in consultation with the Board and management of GBS Gold, will review the Company's operations and investigate production, restructuring and recapitalization plans.
Attached to this news release is a letter from the Administrators setting out the process in Australia and the approach for seeking and agreeing to potential restructuring outcomes. If the Australian subsidiaries cannot ultimately be restructured or continue as a going concern, they may then be subject to liquidation proceedings.
The appointment of the Administrators is required as a result of production issues and weaker operating cashflows leading to a reduction in the Company's cash resources. In particular, GBS Gold's Australian subsidiaries have recently suffered from lower production and cashflow losses as a result of the following:
- A stope failure experienced in the Brocks Creek underground mine in June and recent experiences within lower levels of this orebody. Following the stope failure, development of the underground workings continued into lower levels of this mine where it is now evident that ore tonnes and gold grades in these mining levels are below those experienced in the higher levels of the mine. As a result, the economics of the mine have deteriorated and additional drilling is required to confirm the geological interpretation that ore tonnes and grades will improve towards previous levels as mining progresses deeper.
- Mining of the Chinese South Extension open pit mine has recently required, and is expected to continue to require, removal of greater quantities of waste rock material than originally anticipated, resulting in reduced ore quantities available for the Union Reefs plant. Ore from other available open pit sources is not expected to cover this shortfall.
- In the course of ramping up production to in excess of 200,000 tonnes per month through the Union Reefs plant, the Company incurred additional production and capital costs while experiencing significant cost increases in Australia, particularly in fuel, processing consumables and labour.
- Production delays and lower ore grades than planned at the Tom's Gully operation have led to increased start-up costs. Based on recent mining and processing activities, ore grades from the underground mine in the short term are
expected to be less than budgeted until the higher grade veins of the orebody are accessed.
- The Company's inability to secure appropriate financing in the current market conditions.
The Company is currently working closely with the Administrators to assess the effect upon the future business and direction of the Company and its Australian subsidiaries, and will provide further advice to shareholders in due course.
