A planned US$233 million manganese mine at Matthews Ridge, Region One by Canadian firm Reunion Gold Corporation is at a standstill having been affected by the economic slowdown in Asia and other parts of the world making it difficult for the company to find financing.
“The Matthews Ridge Project is currently on care and maintenance while the company is evaluating different financing options, including the sale of certain assets, the issuance of securities, partnership, joint venture or other arrangements. Given the recent economic slowdown in Asia and other parts of the world, the demand for steel and related products including manganese has dropped significantly,” the company’s management said in a recent discussion and analysis regarding the financial condition of the firm and the results of operations for the quarter which ended on June 30.
“This, and other economic factors, has had and continues to have a direct impact on the market price of manganese and, combined with a depressed equity market for junior mining companies, makes it difficult to finance the development of manganese projects such as Matthews Ridge,” the company said.
“While management has been successful in securing financing in the past, there can be no assurance that it will be able to do so in the future or that these sources of funding or initiatives will be available to the company or that they will be available on terms which are acceptable to the company. If management is unable to obtain new funding, the company will be required to further delay the development of the Matthews Ridge Project and may be unable to continue its operations,” it added.
Reunion’s subsidiary, Reunion Manganese Inc (RMI), had initially said that the mine would be commissioned mid-2014. The company was granted four prospecting licences in September 2010 for a period of three years. RMI subsequently applied for two one-year extensions which was expected to expire in September 2015, unless an extension of the PLs is obtained.
Guyana Geology and Mines Commissioner Rickford Vieira told Stabroek News that the company had applied for a renewal of the PLs and these are still being processed. He said that the company has submitted everything that they are required to. He pointed out that the firm is still trying to get financing and given the financial status of economies around the world, it has been difficult.
The company’s management said that subject to the approval and at the discretion of the Minister, the PLs can be renewed for additional terms and RMI has applied for an additional one-year extension. The approval of the extension application is pending. There can be no assurance that the extension will be approved, it was noted.
Further, management said that given the depressed state of the manganese market, RMI is not in a position to complete a feasibility study which is a requirement to obtain a mining licence. For the June quarter, the company did not carry out any field activities and all exploration and development activities have been suspended until it has secured its funding requirements.
Reunion’s management also noted that the company is in the exploration and development stage and has no source of revenue. At June 30, 2015, the company had a working capital deficit of Cdn$2.4 million including loans from two of the company’s executive officers of Cdn$1.5 which repayment cannot be demanded prior to June 30, 2016. For the first quarter of this year which ended June 30, the company incurred a loss of Cdn$284,186 and has an accumulated deficit of Cdn$117.5 million as of June 30, 2015.
“The company’s working capital deficit creates uncertainty regarding its ability to continue operations as a going concern. The company’s ability to continue operations is dependent on securing financing necessary to settle its current working capital deficit, to fund its existing commitments, including payments to maintain the Matthews Ridge PLs in good standing, to conduct minimum exploration and evaluation programs, and to pay for general and administration expenses for at least the next 12 months,” it said.
According to the company, if adequate financing is not available, it may be required to further delay the exploration and development of the Matthews Ridge Project or it may have to sell or relinquish its rights to certain of its interests. Its ability to continue operations also depends on the continued financial support from its senior officers.
In July 2013, the company announced a proven and probable reserve estimate of 26.3 million tonnes of manganese with an average grade of 14.2% manganese at its Matthews Ridge project. A subsidiary of Union Carbide Corporation had operated a manganese mine in the area from 1962 to 1968. In excess of 1.66 million tonnes of manganese concentrate was shipped from the mine site during that period.
Reunion had said that production was scheduled over a period of 10 years with an open pit mine and conventional washing and gravity plant processing 2.8 million tonnes of ore per year. Its pre-feasibility study envisioned production of 750,000 tonnes of manganese concentrate per year over a 10-year mine life at an initial capital cost of US$233 million. It forecast an internal rate of return of 15.7% based on consensus manganese price forecasts. Further, the study had said that there was potential for expansion as satellite manganese deposits offer significant potential to extend mine life or lead to expansion.
Reunion was awarded the rights to Matthews Ridge in September 2010 and in March 2011, the company signed a mineral agreement with the Government of Guyana.
In January last year, the company announced that it had signed a Memorandum of Understanding with the National Energy Corporation of Trinidad and Tobago to explore the possibility of building a manganese processing plant there. “In addition to its proximity to Guyana, Trinidad and Tobago offers numerous benefits including competitive power costs, deep sea port facilities, dedicated areas for industrial projects and proximity to silico-manganese markets,” the company had said in a statement.
