Red 5 faces delays at gold mine

Gold miner Red 5 will be forced to put its Siana operations on temporary standby by the end of the month after running into regulatory delays for construction of new infrastructure.

Red 5 shares were battered after the Perth-based company told the market it would temporarily place its processing plant at the Siana mine on standby, after delays in the Philippines government processing an environmental compliance certificate required for construction of a long-term tailing storage facility.

The existing TSF facilities can only accommodate the needs of the open-pit mine until the end of the March quarter, and so regulatory approval for construction of a long-term TSF was needed.

Red 5 hopes to recommence open-pit mining at Siana in the June quarter, however in the meantime it said it would temporarily suspend some personnel requirements at the mine, as well as reducing other operating and overhead costs.

Open-pit mining at Siana is now expected to be completed around November, with the company planning on an underground operation at the site after that.

However, with the delay announced today, Red 5 also said commitments for major capital items for the underground development would be deferred until early 2018.

“Underground development will continue throughout 2017 using the lower-cost hand-held air-leg mining techniques,” the company said.

“Red 5 considers this to be an appropriate measure in the current circumstances to protect its balance sheet, with first underground ore planned for March 2018 and steady-state production commencing around December 2018.”

Red 5 managing director Mark Williams said the company’s new operational strategy would allow it to continue moving foward with plans to establish a long-term mining operation at Siana.

“We believe that the combination of measures to be implemented – including the revised open pit mine plan and a decision to defer for now some of the larger capital items required for the underground mine – represents the best possible way of optimising our production strategy, managing the current operational and regulatory uncertainties, and protecting our balance sheet and shareholders’ interests,” Mr Williams said.

“We will be working closely with the team on the ground and with the local communities to manage any impacts arising from the decision to temporarily place the processing plant on standby.

“We will of course also continue working closely with the DENR to expedite the approval for the tailings construction program.

“Under this strategy, we will be targeting a resumption of open-pit milling operations by the middle of 2017, subject to receipt of the DENR approval, with the revised mine plan set to deliver a substantial amount of recovered gold in the second half of the year.”

Red 5 shares closed 15.1 per cent lower to 7.3 cents each.