Wrap Text
Voluntary confirmation of release of Q2 Interims
GREAT BASIN GOLD LIMITED
(Incorporated in Canada and registered as an External Company in
South Africa)
(Registration No. 2006/021304/10)
Share Code: GBG ISIN Number: CA3901241057
("GBG" or "the Company”)
Great Basin Gold Announces Results to June 30, 2012
Strategic review process initiated & senior management changes implemented
August 15, 2012 Vancouver, BC - Great Basin Gold Limited ("Great Basin Gold" or the "Company"),
(TSX: GBG; NYSE MKT: GBG; JSE: GBG) reports unaudited results for the three and six months ended
June 30, 2012 and other material corporate developments.
Executive Summary
Due to technical and infrastructure issues at both principal projects, the Company’s mining operations
underperformed in the second quarter. As a result, Great Basin Gold lost $0.05 per share on revenues of
$32.4 million. Revenue shortfalls were primarily due to delays in on-reef ore development and water
management problems at the Burnstone Mine and delays in accessing higher grade stopes at the
Hollister trial mining project. Because of the revenue shortfalls, the Company faces a near-term liquidity
challenge. The Board has formed a special committee to consider strategic alternatives, including asset
divestitures, equity financing, bank refinancing, and other possibilities that are discussed below. The
Company has implemented an aggressive further cost reduction program involving off-site and corporate
overhead costs and is also working with its lenders to seek to restructure the current term loan facilities to
improve the Company’s cash flow in the near term. In light of the production issues, the Company has
again reviewed the carrying value of the Company’s two projects, including with independent technical
consultants retained by the lenders. The Board has concluded that no impairment charge to the carrying
value of the Burnstone mine ($653 million) or the Hollister trial mining project ($126 million) is currently
warranted. In other corporate developments, Mr Ferdi Dippenaar has resigned as the Company’s
President and Chief Executive Officer, and a director, effective immediately, and Mr Lou Van Vuuren, the
Company’s Chief Financial Officer has been appointed interim Chief Executive Officer and a director.
Patrick Cooke, a director of the Company and audit committee chair, will temporarily serve as
unremunerated interim Chief Financial Officer and the audit committee will be reconstituted during this
period.
The Company believes that the technical and infrastructure issues that lead to this quarter’s unexpectedly poor
operating performance are substantially behind it, and forecast combined production for the remainder of 2012 to be
in the range of 58,000 to 68,000 Au eqv oz.
Combined Operations
3 months ended 6 months ended
June 30 March 31 June 30 June 30 June 30
2012 2012 2011 2012 2011
1
Recovered Au eqv oz 21,080 22,911 31,651 43,990 61,244
Au eqv oz sold 20,473 21,555 40,141 42,028 60,259
Realized Au eqv price $1,581 $1,548 $1,413 $1,564 $1,379
Revenue ($’000) $32,371 $33,373 $56,738 $65,744 $83,081
(Loss) profit from operating
($19,641) ($7,650) $6,808 ($27,291) $6,431
activities ($’000)
Net (loss) profit ($’000) ($21,990) ($17,770) ($1,051) ($39,760) ($21,392)
Adjusted loss per share ($0.05) ($0.03) ($0.00) ($0.08) ($0.02)
Gold equivalent ounces calculated using metal price of US$1,400/oz for Au and US$30/oz for Ag.
Hollister
A total of 23,720 tonnes (Q1 2012: 21,142 tonnes) were trial mined at the Company’s Hollister operation
in Q2 2012, yielding 14,857 gold equivalent contained ounces (Q1 2012: 20,459 Au eqv oz). Although
tonnage mined was only slightly below planned levels, a lower-than-plan mining grade of 0.63 Au eqv oz/t
(Q1 2012: 0.97 Au eqv oz/t) resulted in a lower than planned recovery of 14,688 Au eqv oz in Q2 (Q1
2012: 16,240 Au eqv oz). The high-grade nature of the Hollister ore body can lead to quarterly grade
fluctuations, which are evident when comparing the average grade of1.35 Au eqv oz from production in
Q2 2011 to the average grade of 0.63 Au eqv oz/t from production in Q2 2012. In order to counter
decreasing grade trends, efforts in the current (third) quarter are being focused on decreasing stope width
and controlling dilution; early indications are that up to 20% reductions in stope widths are achievable.
Long hole stoping accounted for approximately 11% of production during the period and is considered the
main contributor to the excessive dilution. Current mine planning suggests an increase in grade for the
remainder of the year as a result of higher-grade stopes being available for mining. The Company is
currently updating its mine plan in conjunction with updating reserve estimates which may impact
production estimates going forward.
During the first half of 2012, Hollister experienced challenges in mining flexibility due to the lack of
available working stopes as well as a high rate in turnover of personnel. Development for the quarter was
focused on providing access to the Upper Zone for additional delineation drilling, infrastructure
construction, and accelerated production from higher-grade mining areas.
During the quarter, the Esmeralda Mill at 93% availability processed 25,811 dry tonnes during the quarter
(Q1 2012: 20,042 tonnes) and achieved recoveries of 90% and 59%, respectively, for gold and silver (Q1
2012: 87% Au and 62% Ag). Work on the acid wash and carbon regeneration circuit was completed
during June 2012 and all doré is now being poured on site.
A total of 14,863 Au eqv oz were sold during the quarter (Q1 2012: 15,357 Au eqv oz). Au eqv oz
recovered but not sold decreased by 2,239 Au eqv oz to 12,208 Au eqv oz from the previous quarter.
Cash costs of $983 per Au eqv oz were recorded for the quarter (Q1 2012: $850 per Au eq oz); cash
costs were negatively impacted by the lower mining grade as well as the additional transport costs
incurred to process the carbon at Rand Refinery in South Africa.
Burnstone
Technical challenges at the Burnstone mine continued in the second quarter with the temporary service
water handling system failing to provide for the increasing mining areas during May and June, which
severely affected production levels. Development and stoping activities were constrained due to the
limited supply of service water. Although a temporary solution was implemented by early June, and
production and development levels in July were back to levels achieved at the end of 2011, quarterly
targeted levels for development and stoping were not met and this will have a related negative impact on
production targets for the remainder of the year.
As a result of the infrastructural challenges, the Burnstone operations produced 6,392 Au oz in the
quarter (Q1 2012: 6,671 Au oz), compared to the forecast of 17,790 Au oz; however, good progress is
being made with the completion of the permanent water handling system, which is expected to be
commissioned during the September quarter and reduce the risk of production interruptions related to
service water supply.
Good progress was made during the quarter on vertical shaft and other infrastructure construction that
will enable the mine to regain its momentum in meeting the increasing development and production
targets. Cash costs of $2,325 per oz for the quarter were recorded (Q1 2012 : $2,182 per oz) and were
impacted by the low head grade of material delivered to the mill but due to the low volumes from the
delay in ramp-up these costs are not yet considered meaningful relative to post-ramp-up (steady state)
production cost estimates. Steady state production is not expected to be achieved until 2014.
The Company plans to implement a number of near-term steps to enable a turnaround at Burnstone. The
Company believes it will be able to reduce costs through reduction of off-site supervisory and premises
costs and improvements to the use of labour and water-handling. These actions could result in aggregate
cost reductions in the range of ZAR20 million ($2.5 million) per month after a few months.
Based in part on discussions with the Snowden Group, the independent technical advisors retained by
the Company’s lenders, Great Basin Gold’s management currently estimates production of 30,000 Au oz
in 2012 and 90,000-100,000 Au ounces in 2013.
Financial Results and Corporate Matters
Revenue of $32 million was recorded for the quarter, a decrease of 44% over the comparative period in
2011. The decrease in revenue can largely be attributed to the decrease in ounces sold from the
Company’s Nevada operations which had sold a record amount of metal Q2 2011 as a result of
exceptionally high-grade material produced during that quarter as well as settlement for some ounces
recovered in Q1 2011. The increase in cash and non-cash costs had a negative impact on the loss from
operations which came to $20 million (Q2 2011: $7 million profit). A further $1.4 million impairment charge
arising from the loan advanced to our South African BEE partner (Tranter) was recorded. The guarantee
has now been fully called upon and the monies loaned by Great Basin Gold to Tranter and, in turn, paid
by Tranter to its banker, Investec, have been written down to a nominal value in the Great Basin Gold
accounts. The operational performance from the Nevada and South African operations resulted in a
working capital deficit of approximately $23 million on June 30, 2012.
Strategic Review Process
The Company’s Board of Directors has recently initiated a review process to consider a range of strategic
alternatives with a view to preserving and enhancing shareholder value in light of continued financial
challenges from the operational difficulties experienced, particularly with the production ramp up at the
Burnstone mine. Strategic alternatives are likely to include, but are not limited to, the sale of all or a
portion of the Company's assets, a merger or other business combination transaction involving a third
party acquiring all of the Company, a capital raising, sale of royalties or metal streams, recapitalization,
reorganization, or restructuring of the Company, as well as continued execution of the Company's existing
business plan, or some combination of these alternatives.
A special committee ("Special Committee"), consisting of independent directors, Ron Thiessen, Patrick
Cooke, Anu Dhir, Barry Coughlan and Philip Kotze, has been appointed to oversee the strategic review
process. CIBC World Markets Inc. (“CIBC”) has been retained as financial advisor to the Board.
As part of this strategic review process the Company’s President, Chief Executive Officer (“CEO”) and
director, Mr Ferdi Dippenaar has resigned and Mr Lou Van Vuuren, the Company’s Chief Financial Officer
(“CFO”) has been appointed as Interim CEO and director, both with immediate effect. In addition, Patrick
Cooke, a director of the Company and the audit committee chair, will temporarily serve as unremunerated
Interim CFO.
Great Basin Gold has also implemented an aggressive cost reduction program and is also working with
its lenders to potentially restructure the current term loan facilities to improve the Company’s cash flow in
the short to medium term. The Special Committee currently intends to seek to raise, through a
combination of asset sales or new equity, a minimum amount of $60 million to relieve the near and
intermediate liquidity concerns.
It is the Company's current intention not to disclose developments with respect to the strategic review
process unless and until the Board of Directors has approved a specific transaction or otherwise
determines that disclosure is necessary or appropriate. Investors should be aware that financing will be
solicited on terms the Company cannot currently predict and that a transaction could be announced at
any time. The Company cautions that there are no assurances or guarantees that the process will result
in a transaction or, if a transaction is undertaken, as to the terms or timing of such transaction.
Great Basin Gold Chairman Ron Thiessen commented: “The water infrastructure setbacks at our
Burnstone mine and the slower access to higher-grade stopes at Hollister converged at a difficult time
and have created a near-term liquidity challenge for the Company which the Special Committee and
CIBC will need to address as a priority. While the Board believes in the underlying value of the
Company’s two principal gold projects, our current financial situation requires that we will investigate all
potential liquidity sources. As our financial situation and the results of our Strategic Review process may
require us to institute material changes in the Company, the Board felt changes in the executive suite
were necessary. Mr Dippenaar oversaw the development of the Company’s two gold mining projects
during a period which witnessed the worldwide financial crisis, skyrocketing capital cost and other
challenges which the Company ultimately overcame. We thank him for his dedication and wish him well in
his future endeavours. Mr Van Vuuren has been Great Basin Gold’s CFO since 2008, has long-term
relationships with the Company’s lenders and understands every facet of the Company’s operations. He
will be of key assistance to the Special Committee and we welcome his assumption of duties as Interim
CEO.”
Lou van Vuuren
Interim CEO
For additional details on Great Basin Gold Ltd. and its gold properties, please visit the Company’s website
at www.grtbasin.com or contact Investor Services:
- Michael Curlook – Manager of IR and Corp Dev. - 1-888-633-9332
- Tsholo Serunye in South Africa - 27 (0)11-301-1800
- Barbara Cano at Breakstone Group in the USA - 1-646-452-2334
Shareholders of the Company are reminded that they may request a hard copy of the complete audited
financial statements free of charge upon request from any of the Investor Services personnel above or
from the Company’s Corporate Office at Tel: +27 (0) 11 301 1800, Fax: +27 (0) 11 301 1840 or Email:
info@za.grtbasin.com
This document contains “forward-looking statements” that were based on Great Basin Gold’s expectations, estimates
and projections as of the dates as of which those statements were made. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as “outlook”, “anticipate”, “project”,
“target”, “believe”, “estimate”, “expect”, “intend”, “should” and similar expressions. Forward-looking statements are
subject to known and unknown risks, uncertainties and other factors that may cause the Company’s actual results,
level of activity, performance or achievements to be materially different from those expressed or implied by such
forward-looking statements. These include but are not limited to:
- uncertainties and costs related to the Company’s exploration and development activities, such as
those associated with determining whether mineral resources or reserves exist on a property;
- uncertainties related to feasibility and sensitivity studies that provide estimates of expected or
anticipated costs, expenditures and economic returns from a mining project; uncertainties related to
expected production rates, timing of production and the cash and total costs of production and
milling, all of which impact on project valuation;
- uncertainties related to the ability to obtain necessary licenses, permits, electricity, surface rights
and title for development projects; operating and technical difficulties in connection with mining
development activities;
- uncertainties related to the accuracy of our mineral reserve and mineral resource estimates and our
estimates of future production and future cash and total costs of production, and the geotechnical
or hydrogeological nature of ore deposits, and diminishing quantities or grades of mineral reserves;
- uncertainties related to unexpected judicial or regulatory proceedings;
- changes in, and the effects of, the laws, regulations and government policies affecting our mining
operations, particularly laws, regulations and policies relating to
- mine expansions, environmental protection and associated compliance costs arising from exploration, mine development, mine operations
and mine closures;
- expected effective future tax rates in jurisdictions in which our operations are located;
- the protection of the health and safety of mine workers; and
- mineral rights ownership in countries where our mineral deposits are located, including the effect of the Mineral and Petroleum Resources
Development Act (South Africa);
- changes in general economic conditions, the financial markets and in the demand and market price
for gold, silver and other minerals and commodities, such as diesel fuel, coal, petroleum coke,
steel, concrete, electricity and other forms of energy, mining equipment, and fluctuations in
exchange rates, particularly with respect to the value of the U.S. dollar, Canadian dollar and South
African rand;
- unusual or unexpected formation, cave-ins, flooding, pressures, and precious metals losses (and
the risk of inadequate insurance or inability to obtain insurance to cover these risks);
- changes in accounting policies and methods we use to report our financial condition, including
uncertainties associated with critical accounting assumptions and estimates;
- environmental issues and liabilities associated with mining including processing and stock piling
ore;
- geopolitical uncertainty and political and economic instability in countries which we operate; and
- labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour
in markets in which we operate mines, or environmental hazards, industrial accidents or other
events or occurrences, including third party interference that interrupt the production of minerals in
our mines.
Cautionary Note regarding Non-GAAP Measurements
Cash cost per ounce/tonne is a not a generally accepted accounting principles (“GAAP”) based figure but rather is
intended to serve as a performance measure providing some indication of the mining and processing efficiency and
effectiveness of operations. It is determined by dividing the relevant mining and processing costs including royalties
by the ounces produced/tonnes milled in the period. There may be some variation in the method of computation of
“cash cost per ounce/tonne” as determined by the Company compared with other mining companies. Cash costs per
ounce/tonne may vary from one period to another due to operating efficiencies, waste to ore ratios, grade of ore
processed and gold recovery rates in the period. We provide this measure to our investors to allow them to also
monitor operational efficiencies. As a Non-GAAP Financial Measure cash costs should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with GAAP. Adjusted loss per share is also a
Non-GAAP measure and is calculated by excluding the impact of certain fair-value accounting charges and once-off
transactions. We also make reference in our disclosures to “working capital” which is also a Non-GAAP measure and
includes cash and cash equivalents, trade and other receivables, current inventories, trade payables and accrued
liabilities. There is material limitations associated with the use of such Non-GAAP measures.
For further information on Great Basin Gold, investors should review the Company’s annual Form 40-F filing with the
United States Securities and Exchange Commission www.sec.gov and home jurisdiction filings that are available at
www.sedar.com.
Johannesburg
15 August 2012
Sponsor
Sasfin Capital
(a division of Sasfin Bank Limited)
Date: 15/08/2012 03:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
