Hambledon Mining plc is a gold mining and development group, which is operating the Sekisovskoye gold mine close to Ust Kamenogorsk in East Kazakhstan.
The Company has been mining from an open pit and operating an 850,000 tonnes per annum treatment plant since 2008. Underground mining at Sekisovskoye began in late 2011 on time and on budget but has been temporarily discontinued whilst the Company assesses the optimum method of extraction . It hopes to complete the purchase of Akmola Gold LLP, bringing in to the group two gold deposits with a combined resource of 440,000 ounces gold.
In December 2012, African Resources Ltd., an investment group, completed the purchase of a 60% holding in the Company through a partial tender offer.
This year’s production was helped by the efforts to ‘winterise’ operations in 2011.
Chief executive Tim Daffern described the start of 2012 as a ‘quarter of mixed fortunes’. Today’s update shows a fairly strong operational performance, and the recent US$3 million investment from the European Bank of Reconstruction and Development was also a welcome boost.
However, as reported last week, during this time Hambledon has encountered a few issues – relating to environmental fines, stalled acquisitions and some operational matter. Consequently the stock lost about a third of its value last week.
After shooting up around 8.5 per cent in early deals the eased back a little and this afternoon shares were changing hands at 1.85p, up 4 per cent.
Fairfax analyst John Meyer reckons there’s value in the shares at these levels, should the current operational performance continues.
“There is a lot of bad news discounted in the Hambldeon share price given the flow of negative news,” he said in a note to clients.
“Management have said that they are meeting their budgets to reach targets for this year of 26,000 oz which includes production from mining 100,000 tonnes from underground production for the full year from 14,504 tonnes achieved so far – should they achieve these there is value in the shares.”
This morning’s first quarter results showed that mined output increased 18 per cent compared with last year to 146,080 tonnes while produced gold ounces grew by 9.4 per cent to 4,870 ounces – 5,029 ounces of silver were also produced.
The bulk of this comes from the open pit operation and just a modest amount of ore came from the underground mine – which is higher grade.
But Hambledon highlights that this was the first full quarter of underground extraction and it expects the underground contribution to grow significantly during the rest of 2012.
“It was the first full quarter of gold production from the underground mine which performed in line with expectations and is a solid base from which to grow production,” said chief executive Tim Daffern.
“Extraction from underground remains on schedule to attain a full year target of 100,000 tonnes in 2012 .
“Because of the extremely cold weather, the first quarter is always the most challenging, but nevertheless the company produced a total of 4,870 ounces gold, an increase year-on-year for Q1 of almost 10% and improvements were seen across a number of key indicators.”
He adds: “The performance and reliability of the process plant was encouraging during severe weather condition, helped by the winterisation programme carried out in 2011.”
Daffern this morning described the start of 2012 as a ‘quarter of mixed fortunes’.
Clearly the update shows a fairly strong operational performance, and the recent US$3 million investment from the European Bank of Reconstruction and Development was also a welcome boost.
However, as reported last week, during this time Hambledon has encountered a few issues.
A deal to acquire neighbouring gold properties has stalled because the transaction has yet to receive approval from the Kazakh authorities, which has indicated its intention to exercise pre-emption rights.
Meanwhile it has so far incurred larger than expected fines from the Kazakh environmental authorities, following the previously reported problems with the number three tailings dam at Sekisovskoye.
Last week Hambledon said that it had paid US$5.9 million in fines, compared with its estimate of US$1.8 million. However it also told investors that it would be appealing the fines and if successful funds could be reimbursed.
This saw the group’s share price drop around 35 per cent, from 2.78p to 1.8p.
This morning Hambledon confirmed that the remedial work on the tailings dam would be complete by the third quarter of this year. And the company said it remains confident that the fines paid to date would be ‘significantly reduced’.
Work is also ongoing to build a fourth tailings dam, and this is now three quarters complete.
Also the design and construction of a new effluent disposal and treatment building is due to start later in the current quarter. The total project could take 14 months to complete. This system will substantially lower the operating costs of the mineral process plant and effluent disposal, Hambledon said.
Hambledon also reported that gold recoveries in the process plant continue to be below budgeted levels.
It says this relates to fluid chemistry and a change in the ‘hardness’ of the ore. Modifications to the plant are ongoing. Hambledon says this will be complete by ‘mid-2012’ so that higher gold recoveries can be attained.
The ramping up of the underground mining operation is also expected to boost production going forward.
Hambledon confirmed that underground mining continues as planned. During the year it intends to mine 100,000 tonnes of ore as it establishes a platform of infrastructure for future operations.
Trials of different extraction stope dimensions have been carried out. And the company says this has given sufficient confidence so that bulk mining can be accelerated. The trial operations also allowed grade control methods to be tested, which has ensured that high grade ores were not intermingled with low grade material.
In terms of finance operations Hambledon confirmed that it had raised a total of US$8.6 million during the period through the placing of new shares – as well as its US$3 million ERBD funding.
On top of this it says the conditions for the first US$10 million drawdown of an EBRD debt facility are well advanced and it expected to receive this first tranche by the end of the first half.
Additionally it also confirmed the receipt of US$1.2 million following bankruptcy proceedings against, Ognevka.