Orinoco Gold’s new chairman sets the record straight on what is going on at its Brazil mine
Mining & Resources
The new chairman of Orinoco Gold (ASX:OGX) wants shareholders to know that the new management is not resting on its laurels when it comes to fixing the problems of the past.
Adrian Byass, who was named as the new chairman in mid-February following the departure of Joseph Pinto from the role, told * that Orinoco shareholders had every right to be upset about the “extremely poor performance” of the company.
“I just want to start off by saying I empathise with the people who are unhappy, distressed and out of pocket in this venture,” he said.
“Every issue raised was allowed to be raised.
“First off, it’s hard in an environment of low communication, and I can see that that’s clearly been something that this company has been suffering from for a long time, up until quite recently; that just exacerbates people’s uncertainty.”
Brazil-focused Orinoco has faced numerous problems with production at its Cascavel gold mine, and is facing allegations of poor operating procedures, gold theft and conflicts of interest.
A number of shareholders have turned to the ASX and ASIC in the hopes of sparking a shake-up of the current corporate regulations.
>>Read what shareholders had to say here
In the past year Orinoco’s share price has disintegrated from a 52-week high of 13c to trade at an all-time low of 0.4c. That’s a 97 per cent dive.
It once traded at nearly 35c — in late 2012.
One shareholder lost his entire lifesavings — hundreds of thousands of dollars – while others suffered relationship breakdowns.
Mr Byass was brought in to help Orinoco because of his past success in the mining industry, particularly with bringing gold mines into production.
Besides being on the board of Orinoco, he also has a seat on the boards of ASX-listed phosphate, zinc, nickel and lithium companies.
Mr Byass said that while former managing director Jeremy Gray had been a shareholder of Orinoco’s largest creditor, Cartesian, he was not a “significant shareholder” and it was a fact the past management had disclosed.
“I looked at his bio and appointment and it clearly outlined his association there, but he wasn’t a significant shareholder of Cartesian,” he explained.
Mr Byass also noted that one of the two other Orinoco executives that stepped down in February, after Mr Gray, was not a shareholder in Cartesian.
“So why did these guys step down? Because I wouldn’t join the board with them on it,” he explained.
“If this company was going to be turned around from its dire financial situation, people in there had to come in with enough credibility to be backed by a major shareholder such as [AngloGold Ashanti] in the recapitalisation of the business.
“The previous management did not have the confidence of major shareholders or financiers of the company.”
Mr Byass also wanted to stress that he is helping to turn Orinoco around for no financial benefit.
“I’ve got no shares, no options, I’m not even taking a salary,” he said.
“I’m here because a major investor in the company asked me for a favour and that is what I am trying to do here.”
Boots on the ground
The first move made by the new management was to send managing director Matthew O’Kane to Brazil to assess the Cascavel operation.
“Shareholders have to realise their angst at previous performance and management, which is being borne by the MD Matt at the moment, I said before I empathise with, but I do think that it is unfortunately directed at the guy who is trying very, very hard to fix it,” Mr Byass said.
“He has now spent a couple of weeks in Brazil, which the previous managing director in two years had never once visited site.
“I personally sent over a geologist who is Brazilian born and trained, who works for me on another venture here in Australia, over with him to make sure language-wise he was able to get every bit of fact that he needed to make his judgements on the basis of the company going forward.
“So Matt’s engagement here is very real and at every level.”
Last week Orinoco updated shareholders on the learnings of that visit, which included the development of a sampling technique to estimate mining dilution that will be incurred during mining at Cascavel.
Orinoco said the new sampling method had assisted mine and processing staff greatly in being able to predict the head grade of the run of mine material being produced.
During Mr O’Kane’s visit, the plant had been processing about 100 tonnes a day, at an average head grade of about 4 grams per tonne (g/t) of gold.
Recoveries from the plant had been averaging close to 80 per cent, which produced about 300 grams of gold in concentrate each day.
Backing of supportive major shareholder
Despite the problems Orinoco has faced, major investor AngloGold Ashanti (ASX:AGG) has stuck by the junior gold producer.
AngloGold became a major shareholder in February 2017 after it injected about $5.9m to secure a 15 per cent stake in Orinoco.
The South Africa-based major is also Orinoco’s partner on the Faina goldfields project.
“They’re not dumb, they’ve got a 13-million-ounce gold mine 120km north of [Cascavel],” Mr Byass said.
“They know more about this ground than [Orinoco] did.
“They want to be supportive because they want this company to stay afloat and therefore, they don’t see something in here that’s rotten to the core.
“They’ve been on site and they’ve been in the field and they’re part of a joint venture, so they know what’s going on.”
The new management is also cooperating with regulators.
Mr Byass told * Orinoco had been contacted by ASIC, but could not reveal what the topic of the discussions were.
“Yes, we have been served a letter which has asked us to provide information,” he said.
The ASX has already concluded its investigation into shareholder concerns and was “satisfied with the answers”, according to Mr Byass.
Avoiding shareholder dilution
Orinoco is very close to announcing a “material capital raising” and is currently in a trading halt.
Mr Byass said he did not want to undertake a dilutive capital raising that would hurt shareholders further.
“Shareholders are rightfully aggrieved when deeply discounted placements are done for the wrong reasons to sophisticated investors,” he said.
“I can say quite comfortably that the trading halt that we’re in at the moment is going to be offering a rights issue to shareholders so that if they take it up, they will not be diluted.
“We’re actually approaching many things in a different way.
“I think that we genuinely will turn this company around.”
