A mining company operating a gold project in Western Australia has been placed in administration and is now up for sale as one of several small businesses in the industry struggling to cope with high costs.
The collapse comes alongside the sale of another mining company whose parent was placed in administration.
Navigator Resources, an ASX-listed mining group, was placed in administration on March 28 after the board of directors concluded it couldn’t operate the business under its current cost base.
In a statement, the company said it would appoint Bryan Hughes of Pitcher Partners to the company, to “determine the best strategy for realising the maximum value” of the company’s gold mining projects.
Hughes told SmartCompany this morning while the mining industry is booming, there are plenty of smaller companies struggling to survive.
“It all comes down to what your cost and production costs are,” he says. “Even with relatively good gold prices, costs can be too high.”
Navigator manages the Bronzewing Gold Project outside of Leinster in Western Australia, which houses a 2.3Mtpa gold processing plant, along with an airstrip, infrastructure, workshops and a 280-person accommodation village. The resource base of the location includes 980,000 ounces of gold.
Other projects include the Leonora Gold Project with a resource base of 745,000 ounces of gold, and the Cummins Range Rare Earth Project.
In the company’s latest report for the half-year ending in December 31, 2012, the company posted revenue of $57 million but recorded $70 million in costs, resulting in a total comprehensive loss of $18 million and 32 cents per share.
Hughes told SmartCompany the business wasn’t able to reduce its costs.
“Senior management came to the conclusion they couldn’t turn around the losses, and there was no point throwing extra funds at the business. They just couldn’t get their costs down,” he says.
“There are always risks in mining.”
Meanwhile, Ferrier Hodgson has put up the Murchison Gold Project for sale, after its owner Kentor Minerals was placed in administration. Kentor Minerals is a subsidiary of ASX-listed group Kentor Gold, which is not affected by the appointment.
Ferrier Hodgson partners Tim Michael and Darren Weaver were appointed to the company on March 28.
“This appointment has been made to give the board time to consider and evaluate additional finance opportunities,” Michael said.
“In the meantime, the mine is continuing to operate whilst we conduct an urgent review of the company’s finances.”