"MELBOURNE-based junior Austindo Resources must get its hands on a further $US25 million ($A31.7 million) to complete development at its struggling Cibaliung gold project in Indonesia, as complications surrounding the decline go from bad to worse.
Project costs increased to $18.5 million in August last year when the company underestimated plant re-erection costs, had to re-rate seismic data, encountered poor ground conditions, and faced additional construction, engineering, earthworks and steelworks costs.
Serious delays with the decline have prompted the company to put off first gold pour indefinitely and to secure an additional $5 million debt facility from ANZ Bank, which must be accompanied by a $20 million equity raising. Gold pour was most recently pegged for May 27.
With the share price at 2.7c late this morning, Austindo would need to issue more than 740 million shares to raise the required equity.
Company secretary Andrew Cooke told MiningNews.net's sister publication PNGIndustryNews.net he was not pleased to have that much paper on issue but the money needed to be raised for the project to go ahead.
Austindo has used up its original $26 million debt facility.
The company has already organised $5 million in equity with shares to be placed to PT Austindo Nusantara Jaya, AuSelect and Austindo directors. Cooke is confident of finding the remaining $15 million.
Cooke said the finance facility with ANZ would need to be restructured in line with the anticipated delay in first gold delivery, previously planned for June, which was likely to include changes to the hedging arrangement.
Decline construction has been in trouble since it started, with a delay in the mobilisation of the contractor to site. Adverse ground conditions then caused clogging of the roadheader, and a large "deformation" blocked the decline at 70m, as reported in November.
Remedial work was planned at that stage to remove the blockage and continue decline construction, but progress to this point remains "unsatisfactory".
Austindo reported that remedial operations were "more extensive than anticipated", and encountered voids that required cement fill – including a large void above the roadheader that caused remedial work to stall on January 14 while it was safely filled. Large sections of the floor have also required concreting.
The rear conveyor of the roadheader was buried by material collapsing around it but it has not been determined yet if it has been damaged.
The decline has a further 1300m to advance under the current mine plan, which is being reviewed.
Cooke said a revised date for first gold pour would be released one the mine review was complete.
Austindo has issued a notice to show cause to the contractor and has received a response that is also under review.
The company is considering its options at this point, which include terminating the decline contract, and implementing an alternative mine plan to bring forward first gold pour.
However, Austindo warned the termination of the contract would cause even more delays, and the alternate mine plan involved hand held methods that would generate limited ore for processing and, at best, limited production would be achieved in the second quarter of this year.
Cibaliung is predicted to produce 70,000oz per annum over a six-year mine life once it is fully operational.