Peninsular Gold’s wholly-owned subsidiary, Raub Australian Gold Mining Sdn Bhd (RAGM), which operates the company’s Raub gold mine, has been in discussions with Malaysian environmental authorities regarding additional operational requirements which the authorities have sought to attach to the current environmental consent which governs operations at Raub.
In particular the authorities have requested changes relating to the location of RAGM’s tailings storage facilities which would require significant changes to its tailings management plan. RAGM remains in discussion with the authorities as to the requirement for this new condition and whether it may be reviewed or appealed.
In the meantime, RAGM has taken the decision to halt gold production at Raub pending resolution of this issue in order to ensure continuing compliance with the revised tailings management requirements. Given the onset of the monsoon season, when tailings management is particularly important, this is considered a prudent course of action under the circumstances.
While this is an unexpected development, suspension of production will enable RAGM to undertake important plant maintenance and improvement work during the monsoon season, which should enable a future increase in throughput and productivity. This will better position the business to operate more efficiently in light of the continuing low gold price. It is currently anticipated that operations could re-commence at Raub for quarter 2 of 2015 should there be satisfactory resolution of this situation.
The company is reviewing its operational base at Raub to manage the maintenance programme and reduce overheads during the cessation of operations.
Meanwhile, Peninsular last week requested a suspension of trading of its shares on the AIM Market pending clarification of its financial position.
The group has £1.2 million in convertible loan notes which are due for repayment on December 22, 2014, as well as debt facilities with its Malaysian banking partners (Bank Rakyat Kerjasama Rakyat Malaysia Bhd and Alkhair International Islamic Bank Ltd) who have approximately £18 million of outstanding loans and require servicing in the region of £140,000 per month. The first Alkhair quarterly repayment instalment of US$750,000 is due during December 2014. The first principal repayment instalment of the Bank Raykyat loan is scheduled for June 2015.
The group will be entering into negotiations with its banking syndicate, trade creditors and other creditors. These negotiations may include suspension of capital and/or interest payments. In the event that the group is not able to either agree appropriate terms with its creditors and/or raise new funds, then the group would not be in a position to meet its financial obligations.