MINING MARKETS AND INVESTMENT NEWS – Query — Rea Gold buckled under poor planning

Could you please advise me, and other shareholders, of the present status of Rea Gold?

.BJames Bethune

Rea Gold and its subsidiary, Bissett Gold Mining, filed for bankruptcy in December 1997 after failing to reach an agreement with NM Rothschild & Sons, the principal lender for the Bissett gold mine in Manitoba. The US$23-million debt owed Rothschild was secured by charges over the assets of both Bissett Gold Mining and Rea Gold. After the bankruptcy papers were filed, directors of both companies resigned and operations ceased at Bissett.

Rea Gold’s other main subsidiary operated the San Gregorio gold mine in Uruguay. However, its assets were charged under a project finance facility in favor of Standard Bank of London in the amount of US$31 million.

Rea Gold acquired San Gregorio in mid-1996 through a merger with American Resource Corp. The US$46-million mine poured its first gold in early 1997, but was not operating at a profit when Rea Gold initiated plans to re-open Bissett.

For the first six months of 1997, Rea Gold produced 24,385 oz. gold and 28,641 oz. silver from San Gregorio and its Mt. Hamilton gold-silver mine in Nevada. A loss of US$8.5 million was reported for that period.

The Mt. Hamilton heap-leach mine was Rea Gold’s first attempt to operate a mine (A previous mine, Samatosum in B.C., was operated by Rea’s senior partner). Unfortunately, Mt. Hamilton’s mine plan was based on flawed interpretations of geology and structure. Production and grades were lower than expected and the stripping ratio wound up higher than was projected.

Mining ceased in June 1997.

Rea Gold re-opened Bissett in the summer of 1997 at an estimated cost of US$59 million.

It soon became obvious that Bissett, too, would not live up to expectations.

This gloomy outlook, combined with the less-than-stellar performance of San Gregorio, eventually led to bankruptcy proceedings.

South Africa’s Harmony Gold Mining bought the Bissett gold mine for a reported price of about $14 million from the receivers handling the bankruptcy of Rea Gold. The new owner is currently examining the feasibility of re-opening the operation.

Rea Gold’s San Gregorio mine in Uruguay is still in production, but is now under the control of Standard Bank of London, the main creditor of its Uruguayan subsidiary. Mining is being conducted on a contract basis, and cash generated by operations will be put against Rea’s outstanding debt to the bank.

Rea Gold’s debts still exceed its assets, and its shares no longer trade.

Print

Be the first to comment on "MINING MARKETS AND INVESTMENT NEWS – Query — Rea Gold buckled under poor planning"

Leave a comment

Your email address will not be published.


*


By continuing to browse you agree to our use of cookies. To learn more, click more information

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.

Close