New Guinea Gold (NGG) has adjourned approving its plan of arrangement with PNG Gold after several delays in requests for clarification of the plan. NGG says PNG Gold is yet to provide information in respect to its intention of the consummation of the arrangement and has decided to postpone proceedings until clarification regarding PNG Gold’s funding and security arrangements under the credit clause is received.
The failure of PNG Gold to meet its obligations under the provision of services agreement has left NGG with severe short term cash flow constraints which are compromising its ability to continue its business operations in Papua New Guinea.
“By continuing to refuse or ignore our request for funding under the credit agreement, PNG Gold is damaging the interests of NGG and its shareholders. Management will continue to press for an immediate resolution of this impasse,” says NGG chief executive officer Greg Heaney.
In April this year, shareholders approved the arrangement to result in PNG Gold acquiring all of NGG’s shares. The acquisition was scheduled for approval by the Supreme Court of British Columbia, however NGG has now adjourned this hearing due to the delays by PNG Gold.
NGG entered into negotiations with PNG Gold in a bid to boost its cash flow after a shutdown at the Sinivit copper-gold mine in December last year. A dispute with local landowners over royalty payments saw them take occupation of the site, forcing a shutdown of mining operations for two months.
Whilst the mine has resumed operating the ramp up of gold production has been slower than anticipated and gold production remains well below the capacity being achieved prior to the suspension of operations.
NGG says the first phase of mining at Sinivit is also drawing to a close, as scheduled in its NI 43-101 report and leaching operations are winding down as well. A definitive feasibility study (DFS) is being completed into the economic viability of retreating the partially leached crushed ore remaining on site and the extraction of tellurium. The company believes that if the DFS returns a positive economic result it will extend the life of the existing mine at Sinivit.
NGG is also continuing with its exploration drilling at the Kavursuki zone, which is 2km to the north of Sinivit. Assay results so far have confirmed intersections of 1 metres @ 3.25 grams/tonne gold and 2.1 metres @ 1.21 grams/tonne gold.
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