Ascot Resources (TSX: AOT; US-OTC: AOTVF) is placing its main Premier gold project in British Columbia, which has been delayed several times, on care and maintenance after talks broke down with its mining contractor. Company shares plunged.
The Vancouver-based gold developer said Wednesday it had been locked in negotiations with Procon Mining after the latter proposed to raise its prices, but the talks failed.
In addition, it said negotiations with alternative mining contractors have also dragged on, resulting in delays in mobilizing a mining fleet to the Big Missouri deposit, which is a critical part of the mine’s restart plan. Premier was supposed to start after March, but in February Ascot moved the date to July then in April said August.
In order to preserve capital, the company has determined that the best path forward is to place Premier on care and maintenance, Ascot said. It also called for a strategic review, which often means a company is considering selling a business.
Shares of Ascot Resources sank by a third to close at a new 52-week low of 6¢ apiece on Wednesday in Toronto for a market capitalization of $97 million.
Strategic review
Pausing the Premier project, Ascot said in a news release, would “provide the management team with the time and flexibility to assess strategic alternatives” to advance it toward sustainable production. It wasn’t clear how long the pause would last, but the company mentioned “a couple of months” in the release.
“In the five months since the new management team took over, we have made significant progress,” Ascot CEO Jim Currie said. “However, like many mine construction projects, operational challenges continue to surface, which in turn take time and capital to address.”
The company intends to determine the capital needed to bring the project into sustainable production, he added.
Historic mine
The Premier gold project, located 25 km from the town of Stewart, B.C., is home to a former underground gold mine that opened in 1918 and included four deposits – Silver Coin, Big Missouri, Premier and Red Mountain.
While in operation, it was the largest gold mine in North America until its surface buildings burned down, leading to its closure in 1952. By then, the Premier mine had produced over 2 million oz. gold and 45 million oz. silver.
Ascot has been working to return the historic site to production and successfully poured its first gold in April. However, operations were put on hold after just five months due to insufficient underground development.
The company initially aimed to resume gold production again in August after securing over $100 million since it halted mining last September.
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