A West Australian gold mining business with $14 million in debt has collapsed, with administrators saying the tough environment has led to a raft of industry collapses this year.
A subsidiary of ASX-listed company Reed Resources, GMK Exploration (GMKE) has been placed in administration with Darren Weaver and Andrew Saker appointed from Ferrier Hodgson.
Weaver told SmartCompany cashflow difficulties associated with the lower-than-normal production of gold resulted in the collapse.
“It is a reflection of gold price and rising cost curves combined with difficulties with the grade coming from the mines,” he says.
“The trade creditors are owed around $14 million and of course we’re still reconciling the financials with the clients.”
The business had been operating the Meekatharra Gold Project, but gold production at the mine had been adversely affected during the June quarter from lower head grade. Head grade impacts the amount of gold which can be recovered.
“June quarter gold production was also adversely affected by the mine-to-mill ounces reconciliation, which declined materially from that previously achieved up until June,” a statement from Reed Resources said.
Despite hopes gold production would return to normal in a short time, the impacts on the cash-flow of the business had been too severe to keep operating.
“GMKE cannot continue to operate the Meekatharra Gold Project on a sustainable basis without significant further funding.
“The board of Reed has explored all potential funding sources in the available timeframe, but it has been unable to secure further funding to allow the ongoing operation of the Meekatharra Gold Project,” the statement said.
Reed Resources is continuing to operate as normal.
Weaver says of the gold mine’s 80 staff, no jobs have been lost and they’re hoping for a sale of the mine.
“At this stage we’re going to have a sale process and we’re looking for parties to invest in the entity or acquire it. We’re hopeful to have a new investor soon to help with the ongoing operations,” he says.
This year Ferrier Hodgson has already handled the administration of three gold companies and in March SmartCompany wrote about the collapse of Navigator Resources.
Navigator Resources, a $57 million gold mining company, managed the Bronzewing Gold Project in Western Australia and wasn’t able to reduce its costs to stay solvent.