Central Norseman Gold has announced plans to place its three West Australian mines into care and maintenance following revelations the company has incurred a loss of $3.2 million over 6 months.
The company said that contract mining at its Bullen mine is expected to be completed by May, while the current production schedule at Harlequin and North Royal mines will see operations there cease by the end of June.
At this time, the company will place all three mines into care and maintenance.
It said the remaining operations at the mines is expected to produce between 6-8 thousand ounces of gold.
The move to halt production comes as Norseman revealed it had incurred an unaudited EBITDA loss of $3.2 million from July last year to March 2014.
The company said it was reliant upon its major shareholder, Tulla Resources Group, to provide adequate working capital to continue operations.
It said unless a deal could be struck with secured noteholders, there is doubt as to whether the company can continue to meet its financial commitments in the normal course of business without the ongoing support of Tulla.
Shares in the junior miner remain suspended as directors review various options prior to tabling a possible new solution.
In February 2012 the company revealed Tulla Resources was its new strategic partner, stating it would take over the running of it mine and lend $10 million to the company.
Soon after, Tulla prepared a comprehensive forward 3 year mine plan and a growth strategy get production back up to 100,000 ounces a year, and cost per ounce down below $1,000.
It stated "the company’s operations have not produced cash flow sufficient enough to meet liabilities to creditors on a timely basis."
Prior to this it had already put its Bullen and OK Decline mines on care and maintenance, and shut its Harlequin underground mine on the advice of the WA Department of Mines and Petroleum, which recommended it close due to safety concerns.
In February 2013, Tulla poured a further $8 million into the company to pay off staff and administration expenses.
Tulla, and Farrer Place, both which are companies controlled by mining mogul Kevin Maloney, became secured creditors, while other creditors, including Norseman, were classified as deferred.
In its most recent announcement, Norseman said that given the circumstances, there is no guarantee or certainty Tulla will continue to provide the required funds or that it’s secured loan facility or loan notes will not be called.