Falcon Gold said on Tuesday it has sold a controlling 62.5 percent stake in Venice Mine to unnamed investors in a $4 million equity finance deal for re-opening of the mine.
The announcement came as the gold miner reported a $1,663 million loss for the half year ended March 31 this year with maintenance costs for its closed subsidiary Dalny Mine having hit its financial performance.
The company posted a $1,659 million loss during the same period last year.
Falgold recorded a marginal increase in gold production to 4 527 ounces in the review period, up from 4 515 ounces last year.
“In the period under review, the group entered into a Progressive Investment Agreement with an investor with respect to the Venice Mine,” Falgold executive chairman Mr. Ian Saunders said.
“This agreement laid out a process wherein the investor agreed to invest equity finance of at least $4 million over a period of time, and with additional investment, bring Venice Mine back into production.”
The mine was closed in 2002.
Mr. Saunders said Falgold, which did not have plans to reopen Venice Mine had the new investor not come on board, remains with a 37,5 percent stake in the mine after the investment deal was amended this month.
Falgold, Mr. Saunders, had also entered into a rental agreement with an unnamed company for Dalny Mine.
“This agreement, when fully operational, is designed to ensure that not only will the care and maintenance costs of Dalny Mine be paid, but that some net positive cash flow will be evident,” he said.
Dalny Mine ceased operations in August 2013 and was placed under care and maintenance following a myriad of operational problems compounded by the switching off of electricity supplies after it failed to settle its bills.
Around 900 workers were placed on unpaid leave after its closure.
In the review period, care and maintenance costs for Dalny Mine, amounting to $699 948, hit on Falgold’s financial performance.
Mr. Saunders said investments into Golden Quarry, which is currently operational, were expected to pay off soon, with the possibility of improving its performance to sustainability levels.
He said a raft of issues among them liquidity constraints, weak gold prices on the international market, increased mining royalties as well as high operational costs would continue to impact on its viability going forward.
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