Loading ...San Gold has buckled under the combined burden of debt, high production costs at its Manitoba mine and falling gold prices. The company filed for protection from creditors as it works on a plan to try to pay at least some of its debts.
“The proposal process provides an opportunity for San Gold to restructure its operations and may allow creditors to receive some form of compensation for amounts owed to them by San Gold,” the company said in a statement.
San Gold (SGR.TO
0.00%) owns and operates the Rice Lake Mining Complex near Bissett, Manitoba. But its cash operating costs of $1,153 per ounce are among the highest in the sector – and the company has more than $60-million in outstanding debt including convertible debentures and a recent loan with a 14 percent interest rate. Regular operations are expected to continue at Rice Lake during the restructuring process.
“Successful exploration over the past years has defined substantial resources, but the mine has not been run properly and there has been an on-going problem of failing to deliver a grade of ore to the mill that is close to expected grades at a reasonable operating cost,” Mackie Research analyst Barry Allan wrote in a note to clients.
“Given the amount of combined debt outstanding, and an absence of near-term cash flow generation, we fail to see any residual value for equity shareholders.”
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