THE BOURSE WHISPERER: Carbine Resources (ASX: CRB) announced that it is minimising expenditure on its Mount Morgan project to preserve cash reserves while the board decides on its future there. By Jack Baker
Carbine Resources said the decision comes on the heels of an extensive economic review of the project that forecast an increase of the all-in sustaining cost (AISC) from $549 per ounce to $862 per ounce.
The revised AISC, combined with a relatively high pre-production capital cost of $87 million means the project will not generate the level of shareholder returns to justify development under the current parameters.
“Since April 2014, Carbine has spent $12.7 million and has been 100 percent focused on Mount Morgan,” Carbine Resources managing director Tony James said in the company’s announcement to the Australian Securities Exchange.
“It is now abundantly clear that for Mount Morgan to be bankable, all stakeholders will need to make significant amendments to their respective agreements with the company and the project.
“Carbine will now focus on seeking variations to the various corporate and government agreements considered necessary to improve the returns on the project to an acceptable level.
“In particular, the Board believes that to secure project funding, we need to re-negotiate the terms of the agreements with Norton and Raging Bull in respect of Carbine’s ownership and title to the Mount Morgan project.
“The company also requires adequate ongoing support from the Queensland Government, including a reduction in royalties, due to the project being an environmental clean-up project rather than a new mine development.
“Consideration also needs to be given in this regard to the timing associated with ongoing regulatory approvals.
“Carbine looks forward to holding these discussions with all stakeholders and, in the process, securing a future for Mount Morgan.”
The increase is largely due to higher cyanide consumption and lower by-product credits due to a forecast drop in the price of pyrite.
Test work done at the company’s recently completed demonstration plant also found that it would not be able to manufacture copper sulphate at the required market specification.
The review found that these factors, along with updated commodity prices and a shift in the USD/AUS exchange rate would lead to the substantial increase in AISC.