Westonia Mines Ltd has blamed the rising Australian dollar for its inability to finalise a $65 million-plus loan for its namesake gold project, but insisted the project still has a future.
Westonia Mines Ltd has blamed the rising Australian dollar for its inability to finalise a $65 million-plus loan for its namesake gold project, but insisted the project still had a future.
The company said the rise in the A$, which jumped this week to more than US82 cents, had outweighed the benefits of the strong US dollar gold price.
Hence, it had "not yet been able to finalise a funding structure for the WGP development decision that would provide an adequate return to shareholders".
Managing director David Hatch insisted the company still had a positive outlook, even though it had been trying to arrange finance for nearly nine months.
"We haven't given up on this project," he told WA Business News.
"While this has been a little painful, we nevertheless have a pretty positive view," he told WA Business News.
Mr Hatch said only a small rise in the A$ gold price was needed to make the project bankable.
"We are not quite there. We are very close."
Westonia's feasibility study, completed last July, estimated the project would require total capital spending of $65 million, not including financing costs or working capital.
The company has since awarded a $5 million contract to move the Big Bell processing plant to the Westonia mine site, in the goldfields region.
Mr Hatch said that after factoring in rising costs, the company still needed to raise $65 million.
Today's news comes just three weeks after Westonia appointed Minepower as its preferred mining contractor.
It had planned to commence mining by the end of 2007.
Mr Hatch said the company, which has cash reserves of about $8 million following a rights issue in December, was continuing its exploration program in the region.
Westonia's announcement is pasted below:
UPDATE ON FINANCING OF WESTONIA GOLD PROJECT (WGP)
As previously advised, the Company has been conducting ongoing financing discussions in connection with funding the development of the WGP. While substantial progress has been made, the recent strengthening of the Australian dollar against the US dollar has impacted upon the financing despite the fact that the US dollar gold price has remained encouragingly strong.
Consequently, the Company has not yet been able to finalise a funding structure for the WGP development decision that would provide an adequate return to shareholders.
Despite the current challenges that these economic conditions present, the Company will continue evaluating financing and equity raising alternatives in anticipation of an improvement in relevant economic conditions. A strengthening of the Australian dollar gold price would have a favourable impact upon the funding options available to the Company.
Additionally, the Company continues to seek further refinements to its operations strategy of mining the Edna May open pit.
The relocation of the Big Bell Plant is progressing well and is now approximately 70% complete.
Site dismantling work is scheduled for completion in accordance with the contract by the end of May 2007.
The company continues to pursue a series of regional exploration initiatives.
Recently completed work includes the extensive aeromagnetic survey, the IP survey at Anomaly 47 and a programme of 9 RAB holes to test one of the higher ranked Edna May repeat targets. Assays are awaited from this programme.
Further drilling has just been conducted at the Perrins prospect and follow up drilling will occur to test the highest ranked IP targets at Anomaly 47 in the coming weeks.