Difficulties in finding financing has stymied the start of construction of Canadian company’s First Bauxite Corporation’s mine at Bonasika.
“They still looking for financing, it’s very difficult now,” Commissioner of the Guyana Geology and Mines Commission Rickford Vieira told Stabroek News. He said that the company had done a proposal and asked for more time. The company has up to the end of January next year to begin construction having receiv-ed two extensions. The project is one of several that have stalled due to difficulties in finding financing.
Stabroek News reported last week that 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.
In 2013, then minister of finance Ashni Singh had announced that First Bauxite was slated to start construction of a US$120 million calcined operation in late 2013 at Bonasika. However, that has not happened as the company faced financing issues. Earlier this year, then minister of natural resources and environment Robert Persaud and said the company is scheduled to commission the mine this year.
In its latest interim financial statement, First Bauxite said that it does not currently have revenue generating properties and has incurred a loss of US$7.1 million for the nine months ended June 30, 2015. As of that date, the company had an accumulated deficit of US$56.7 million.
“These conditions along with other matters indicate the existence of material uncertainties that may cast significant doubt about the company’s ability to continue as a going concern. While the financial statements have been prepared on the basis of accounting principles applicable to a going concern, adverse conditions may cast substantial doubt upon the validity of this assumption,” the statement said.
It added that the firm’s ability to execute its work plan, meet its administrative overhead obligations, discharge its liabilities and fulfil its commitments as they come due is dependent upon its success in obtaining additional debt or equity financing and, ultimately, on attaining future profitable operations. “While management has been successful in raising additional funds in the past, there can be no assurance it will be able to do so in the future,” it said.
Further, it said that in the event the company is unable to arrange appropriate financing, the carrying value of its assets could be subject to material adjustment. “Furthermore, certain market conditions as well as the risk that the company will not be able to obtain an extension of its Mining Licence with the Government of Guyana, may cast significant doubt upon the validity of the going concern assumption,” the statement said.
The company’s Bonasika Mining License dated July 26, 2012 is valid until July 26, 2032 with an option to renew from time to time for periods of seven years up to the entire life of the mine. It also has a Tarakuli-Canje Permission for Geological and Geophysical Survey dated April 22, 2013 for a three-year term with the right to apply for up to 12 Prospecting Licences.
Last December, First Bauxite announced that it had completed a strategic review of development alternatives for its bauxite mine and said that it had defined what it believes to be a new and more robust project concept and engaged an engineering firm to complete a Feasibility Study (FS) on the new project concept.
The company has also received a one year extension on its construction obligations under its Mining Licence with the Government of Guyana to January 31, 2016. There is a risk the Company will not be able to extend its Mining Licence beyond its current expiration date, it noted.
According to its management discussion and analysis, following an extensive and detailed strategic review during 2014, an optimised project concept has been defined which provides a much greater level of flexibility, improved economic potential and reduced risk.
This new project concept involves bauxite mining and beneficiation taking place in Guyana. This process step has a low level of energy intensity and reduces the energy risk associated with basing the entire plant in Guyana. However, bauxite calcining and sintering would take place in Southern Louisiana, USA to take advantage of readily available, reliable and low cost supplies of natural gas and power. This will reduce capital costs and operating costs, the company has said.
