we may be out of pocket...

as posted on MON thread. all credit to chewy.


=DJ INTERVIEW: Monarch Gold Likely To Call In Administrator30/06/2008 02:19PM AEST
By Stephen Bell
Contributing to DOW JONES NEWSWIRES

PERTH (Dow Jones)--Monarch Gold Mining Co. Ltd. (MON.AU) Managing Director Michael Kiernan said Monday that the small Australian gold miner is likely to be forced into administration after it failed to secure more short-term funding from part-owner Territory Resources Ltd. (TTY.AU).

The decision by Territory to cut off funds, and to appoint a receiver over one of Monarch's mine assets, has "put a significant question over the ability of Monarch to continue in its current form," Kiernan told Dow Jones Newswires in an interview.

"If we do in fact have to appoint an administrator - which is highly likely - it would then put a serious question over the ability of Territory to recover its funding," Kiernan said.

The problems at Perth-based Monarch, whose shares have been suspended since June 18, highlight difficulties faced by small Australian gold companies, despite enjoying multi-decade-high gold prices.

Many are trying to rework ageing mines that are faced with rising costs of labor, fuel and consumables.

Bendigo Mining ran into operational difficulties last year, while St. Barbara shares fell sharply earlier this month after it raised A$63 million in a rights issue to shore up its former Sons of Gwalia mine assets.

An administrator takes control of a company that is in financial distress with the aim of either maximizing the chances that as much as possible of the business can continue to exist or realizing as good a return as possible for creditors should the company need to be liquidated.

Monarch has been under financial pressure since suspending operations at its Davyhurst mine two weeks ago, and is trying to finalize a deal to buy the Mount Magnet project in Western Australia from South Africa's Harmony Gold.

Kiernan resigned as chairman of Territory - a 19% shareholder of Monarch - last Wednesday, after a dispute with Territory's directors over funding support for the gold miner.

The pressure intensified Monday when Territory said it won't provide any more funds to Monarch, while also appointing a receiver over Monarch's Minjar Gold Project.

At the end of the first quarter, Territory was owned around A$18 million by Monarch.

Territory Chairman Andrew Simpson said that the company has appointed the Perth office of Ferrier Hodgson as receivers over Minjar, an asset that Monarch was attempting to sell.

Simpson told Dow Jones Newswires there is "no question" over the ongoing viability of Territory, should Monarch be forced into administration.

"Whatever happens with Monarch, we are fine anyway," Simpson said.

Territory's Frances Creek iron ore mine in the Northern Territory is "profitable," he said.

Still, the company has appointed stockbroker Euroz Securities as its financial advisor, with the task of investigating the "opportunity of securing limited additional funding."

At 0415 GMT, Territory shares were up 4 cents, or 4.9%, at 86 cents, while the S&P/ASX 200 index was up 0.2%. Monarch last traded at 29.5 cents, giving it a market capitalization around A$59 million.

-By Stephen Bell, contributing to Dow Jones Newswires; 61-8-9244-4243; [email protected]