Red Rock Resources (LON:RRR) will now take a controlling stake in its Colombian gold mining associate, Mineras Four Points (MFP).
This afternoon the group told investors that MFP’s ramp-up of its two gold mines has slowed after a number of small but essential parts have been delayed at customs, and also by nationwide strikes in the transport industry.
The news disappointed investors as the shares dropped around 11 percent on AIM.
Red Rock will now take operational control of the projects immediately, and due to the delay it is now paying less upfront for its equity stake. The remaining payments to MFP will be performance related tied to certain key development and production targets.
The company recently hired a new chief financial officer for MFP, and an American engineering consultant visited the site.
While the consultant's full report is pending, Red Rock highlighted that his conclusion was that the mine and plant were ‘without fundamental problems, had capable employees, were capable of expansion, but lacked proper flow-sheets and planning’.
According to the consultant the slight delay is not a cause for concern.
The consultant has now moved on to work with Red Rock’s associate in Costa Rica - Ascot Mining (PLUS:ASMP).
In Colombia Red Rock is interested in two gold mines, El Limon and Machuca. Both assets are recently re-opened gold mines that have needed a relatively small investment to upgrade and increase production.
At El Limon MFP is operating two shifts and the mill is working around the clock.
The mined material has been grading about 12 to 15 grams per tonne and is said to be improving. However it has been decided that MFP should process lower grade material until the plant is running smoothly.
The material being processed is 6 grams per tonne and it has 450 tons in the silo.
Meanwhile Machuca is now operational with initial production at about 20 tons per day, at grades of 6 grams per tonne.
Red Rock also updated investors on some of its other operations.
In Kenya the company is expecting drilling work to expand from the end of this week with diamond, reverse circulation and aircore drills being added to the programme in stages.
In October 2010, CSA Global Ltd ("CSA") and the company finalised drilling programmes to test, validate and extend the current resource targets, and to investigate potential further targets. A drill programme to test copper-gold VMS targets will also take place shortly.
Drilling initially began just before the New Year.
Red Rock now expects the programme to speed up, with the aim to complete the work programmes before the beginning of the rainy season.
It also noted that in Tasmania it does not expect a 700 metre, five hole, drill programme on the Arthur River tenement to find an economic iron deposit.
It said that while each hole found magnetite - a type of iron ore – it was not of sufficient grade and quality to make it likely that it will be an economic deposit.
Elsewhere it said it is reviewing a number of new opportunities.