A number of very important decisions were made that have...

A number of very important decisions were made that have resulted in the company finding itself in the situation it finds itself in now.
In October 2012, in the height of the debate on the merits of the Chinese versus Resolute offers, I felt that the NMG share price could drop to the 2 cent range independent of who got control of the company.

It was clear that both the Chinese and Resolute would leave the running of the company to the current Board and management for at least a period of time. That has happened in the form of the Joint Technical Team. Many posters vented their relief that the CEO was departing but failed to see that the same management team that were directly responsible for the cost over runs, schedule delays, mining decisions and disclosure practices (crusher parts at the port) were still in place.

Resolute, a well experienced African project developer and operator, conducted a cursory due diligence to the extent they could. Only after getting full access via their investment could they do a real assessment.

It was only then apparent that fatal management decisions had been made:

1/. No Bankable Feasibility Study had been performed before commencing plant refurbishment and the rush into mining
2/. Geology - There was no strategy.
3/. Mine Plan - Again, no independent assessment of surface versus underground mining
4/. Satellite Pits, Tailings and imported tailings material - All of these strategies lead to substantial monthly cash losses
5/. Plant Refurbishment - The crusher that had been used during Central African Gold was demolished - leaving neither a back up nor any alternative if schedule delays or financial constraints delayed the crusher. The decision was made to increase processing capacity without Geoogy or Mine Planning informing such a decision
6/. In house mining - rather than de- risking the project by using a contractor initially as all cash constrained junior and mid size miners do, Noble decided that they had the capability to outperform contractors. Used equipment was purchased and failed to perform. The inability to move the huge overburden strip ratio in the satellite pits in a cost effective manner drained the company of cash and resulted in under achievement of gold production.

The operating performance of the company was clear in October 2012, when the company had a chance to:

1/. Critically assess Geology - why grades poor and overburden cost so high
2/. Crusher alternatives - new mobile crushers are freely available in West Africa until main crusher commissioned
3/. In house mining - the prospectus for the Convertible Note clearly outlined the challenges at the time from an availability and cost perspective

Subsequently, the Technical Team has recommended the:

Suspension of surface mining
Restructuring of in house mining
Independent study of the feasibility of Underground Mining

The issue is that these decisions should have been made in October 2012.

In my opinion, Resolute will not throw good money after bad. There is a legitimate question over whether Noble has the capacity to meet its financial obligations relative to the Convertible Note.