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Business |
Highlands Pacific financial troubles to last until 2010
By BRIAN GOMEZ
HIGHLANDS Pacific has restructured
its problematic gold forward sales programme by slashing this
year’s delivery schedule, but the financial pain of the deal will
be severe until the end of 2010.
Unfortunately for Highlands Pacific, almost two thirds of its
projected output would have to be delivered in forward sales
between next year and 2010 at slightly less than US$400
(K1,257.86) an ounce.
This would mean that only a third of the mine’s output could
benefit from high gold prices, assuming production can be lifted
to 110,000 ounces a year, if they were to remain at current levels
of US$600 (K1886.79) an ounce.
The company’s banking consortium has agreed to reduce this year’s
deliveries by 120,461 ounces to 39,539 ounces with the delivery
price reduced to US$399.70 (K1,256.92) an ounce.
The new schedule requiring delivery of 39,539 ounces this year
also results in an extension of forward sales for an additional
two-year period to the end of 2010.
This is the second change in the delivery schedule to be announced
this month. According to the original hedging programme covering
275,000 ounces, the company was scheduled to deliver a total of
112,000 ounces by the end of last year and an additional 78,000
ounces this year.
In a restructure announced last Feb 14, the company indicated
would forward sell 64,700 ounces this month at prices ranging from
US$402 (K1,264.15) to US$421 (K1,323.90) an ounce with total
deliveries of 160,000 ounces during the current year.
Because of production problems this delivery schedule cannot be
met and the company’s financiers have agreed to take delivery of
39,539 ounces this year with the first 3,000 ounce delivery next
month, 7,000 ounces in June and 12,000 ounces in September.
Quarterly forward sale deliveries from the December quarter this
year to the end of 2010 have been set at 17,532 ounces at a gold
price of US$399.74 (K1,257.04) an ounce.
The troubled Kainantu gold mine last year only produced 23,579
ounces of gold – the mine had a net operating deficit of US$3.2
million (K10.06 million) in the December quarter – and the company
has said it is “unlikely” to achieve its target 110,000 ounce
annual production this year.
Consultants have been hired to assist with severe mine dilution
problems that have slashed anticipated gold grades at the mine
site and to also ascertain why the quantity and grade of mined ore
does not tally with processing data.
Because of the production problems Highlands Pacific would have
been incapable of meeting the earlier agreed schedule for delivery
of 160,000 ounces this year.
The company also announced that it has raised US$20 million
(K62.89 million) through a share placement with Resource Capital
Fund IV LP at a price of A$0.2974 a share plus the issue of four
free options for every eight ordinary shares that will be
exercisable at between A$0.50 and A$0.65.
Highlands shares yesterday rose A$0.05 to A$0.30.
 
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