Kin Mining has suspended construction of the $35 million Leonara Gold Project in Western Australia due to concerns of a substantial cost blow out.
Having received a preliminary report from Como Engineers, which covered engineering and metallurgical aspects of the Cardinia Plant Site, Kin Mining has confirmed that there were no fatal flaws with regard to the Cardinia facility. However, Como’s report did identify a number of elements of the processing plant that require additional testwork and design to optimise the project returns. The Como report confirmed the Board’s expectation that there will be a material increase in the capital costs to deliver the LGP.
In addition, Kin has received a preliminary report into the LGP from its new Chief Executive Officer Andrew Munckton, which aligns with the findings of Como and highlights other opportunities to reduce risk and optimise the project’s financial returns.
Based on the information contained in the Como and CEO reports, the Board has determined that the best path forward for the LGP is a suspension of plant construction activities until additional testwork, engineering design scheduling and cost estimates can be completed.
Kin has also held discussions with its financier, Sprott Private Resource Lending, and requested a waiver to cover any potential events of default that the suspension of construction activities and revision to the project cost may trigger. The request covers the expected period until the Como project review is complete and new capital cost estimates have been supplied in detail.
There has been no change to the plans to raise a further A$11M in the near future to fund current liabilities, ongoing exploration programmes, the orderly suspension of construction works, required testwork, engineering and design and corporate overheads for the next six months.
The Board remains confident that the LGP holds significant value.
“The project has a delineated mineral resource base of more than 1 Moz1 gold, located within the highly endowed and operationally active Leonora gold region. Kin intends to continue with its active exploration and drilling programme while it progresses the additional activities required to enhance and optimise the value of the LGP when construction is resumed”, the company stated in an ASX report.