And reading through it again there’s a very relevant comment to Spartan on the closing of mills.
Charlie was talking the textile type but still …
…. “For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles—which are a real commodity product. And one day, the people came to Warren and said, “They’ve invented a new loom that we think will do twice as much work as our old ones.”
And Warren said, “Gee, I hope this doesn’t work because if it does, I’m going to close the mill.” And he meant it.
What was he thinking? He was thinking, “It’s a lousy business. We’re earning substandard returns and keeping it open just to be nice to the elderly workers. But we’re not going to put huge amounts of new capital into a lousy business.”
Not saying NRW and the others employed out there were like unto “elderly workers” by any means, but still I guess that’s the same thinking that had Simon demobilise and stop paying out the wages for more than 165 people then working to push low grade ore through the Dalgaranga Mill?
Daniel NewellThe West Australian
Tue, 8 November 2022 5:56PM
Gascoyne said it could not continue operations in the current climate. Credit: Unknown/NRW Holdings
Dozens of gold miners at Gascoyne Resources’ Dalgaranga mine in the Murchison will lose their jobs after rising costs and WA’s critical skills shortage forced the company to call time and shutter the struggling project.
The shock decision also left the project’s main mining services contractor, with more than 160 staff on site, “blindsided”.
Dalgaranga workers were told of the immediate suspension of mining activity on Tuesday morning and most Gascoyne staff were left contemplating their futures as they waited to be flown off site.
The company last month revealed production at the mine, about 65km north-west of Mt Magnet, had been hit hard in the first quarter by abnormally high rainfall, staff shortages and COVID-19 impacts.
It told the Australian Securities Exchange on Tuesday that the problems had continued into October and November, further curtailing gold output and leading to higher costs and a negative cash flow.
The board said the situation was “not sustainable” and ordered all open pit mining and ore processing be suspended immediately as it starts a review of the company’s operating strategy.
The 2.5 million tonnes-a-year mill will be moved to care and maintenance over the next weeks and “maintained in a state ready for a rapid resumption of production”, while most of the mine’s workforce would be demobilised over coming days.
There are about 85 Gascoyne employees currently on site and about 65 will be offered redundancies.
“It is clear that despite the significant potential of the company’s assets such as Yalgoo, Gilbey’s North and Never Never, the transition to mining this higher-grade ore is not affordable and cannot be optimised at the current time given Gascoyne’s liquidity position,” the company said.
Main mining contractor, NRW Holdings-owned Action Drill & Blast, has about 165 people working at Dalgaranga.
Company secretary Kim Hyman said the contractor had noticed Gascoyne’s shares placed in a trading halt but was “blindsided” by the suspension announcement.
“We’re working through any implications for us. We don’t believe they’re material at this stage but we’ve got to look at the implications and wait for the dust to settle,” he told The West Australian.
The news comes just a little over two years after Gascoyne emerged from administration and relisted on the ASX in late October, 2020. A $125 million recapitalisation enabled it to repay creditors, provide working capital and fund exploration and evaluation activities.
The return to the boards came 14 months after Gascoyne collapsed with $100 million in debt after consistently missing production and cost targets since it delivered first gold in May, 2019.
Gascoyne’s shares had more than halved from 40¢ in late August this year to just 19¢ on Tuesday before they were put on ice.
The company said it had started talks with Dalgaranga contractors and creditors as it looks to restructure its finances to keep the project on care and maintenance in the medium term.
“During this period, the company’s management team will work with its advisers and key stakeholders to develop a new strategic operating plan and implement a financial restructure,” it said
“A key part of this will be to pivot to an exploration/resource growth focus in the short term while preserving the value of the existing assets and securing additional strategic funding.”
That money will be used to bring the Never Never and Gilbey’s North discoveries to reserve status, establish an underground portal and exploration decline from Gilbey’s Pit toward Never Never and develop a five-year plus mine plan, which it warns could take several months to complete.
Managing director Simon Lawson said the decision to suspend activities was disappointing.
“The continued pressure of industry-wide cost inflation, approval delays and subpar operational performance have contributed to the board and I uniting in the view that continuing to operate in these challenging times is extremely high risk,” Mr Lawson said. “We are committed to developing a sustainable +5-year solid mine plan targeting higher margin production and we strongly believe that this focus is in the best interests of the company and our shareholders. “It is extremely sad to have to say goodbye to so many good people who have worked so hard on behalf of the company to this point.”
Mr Lawson said he remained confident about the company’s future given its near-mine exploration success in recent months. But the time it was taking to secure labour and equipment to drill out the high-grade discoveries meant operations at Dalgaranga could not be maintained. Dalgaranga produced just 13,905 ounces of gold in the three months to the end of September, down from 16,298oz in the June quarter and 21,669oz the quarter before that.
Gascoyne had been warning for months that labour shortages, high rainfall and inflationary pressures had contributed to “unacceptably high” production costs, with all-in costs hitting $3135/oz. It ended the quarter with net cash of $18.2 million.
Less than 18 months later the results of that fateful decision speak for themselves.
Then named Gascoyne Resources went into suspension the same day (08/11/23) and shares fell from about 31c to 10c a share in March 23 - just one year ago
….And look at us now?
Here’s some retrospect ‘Easterly’ rebirth comments from Simon since then (via linkedin)
October 2023 (six months ago): This is what drilling can do. Sometimes its just one drillhole. Sometimes it takes more than 400. Depends on how deep a hole you dug for yourself to climb out of.#spartanmindset#focus#highgrade#team
November 2023 (five months ago) : “Spartan 2023 so far...real fear, hard work, mud, hard work, dust, hard work and always gold.#drilling#highgrade#gold”
Three months ago (on winning Paydirt GMG award with WSG “..great teams.Spartan Resources Ltdpurposeful, systematic, resilient hunters”
One month ago: “First Never Never stepout hole of 2024 yields 20.5m mineralised intercept 170m beyond recently released 952koz @ 5.74g/t gold MRE. Who knows what we hit? #spartan1#nevernever#getitdone
Three weeks ago: “And the visible gold 170m below our 0.95Moz Never Never resource returns 11.55m @ 36.77g/t gold, including 4.0m @ 101.07g/t. #real#highgrade#gold#spartan1
One week ago: “Another delivery of golden drill results to enjoy! Had to cut five intervals down to 100gpt Au from one of those pesky Never Never drillholes#notsorry#highgrade#gold#team#getitdone
And the last post, also one week ago …
“As we grow we adapt” “The Spartan Resources Ltd team is incredibly proud to welcome Ms Deanna Carpenter to our Board of Directors today. As an Independent Non-Executive Director Ms Carpenter brings a new and very valuable skillset to our BoD at a very important time.
On behalf of all SPR shareholders we sincerely thank Mr John Hodder and Tembo Capital Management Ltd for their continued support and appreciate their assistance in helping to both diversify our Board and strengthen our independent Board representation. The SPR Board remains at 5 members.
As we grow, we adapt.
What’s next?
cheers
SPR Price at posting:
65.5¢ Sentiment: Hold Disclosure: Held
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