revival plan

Croesus advisers put finishing touches to revival plan



The fate of ailing gold miner Croesus Mining's Norseman gold operations will not be known until the end of the week, to allow the finishing touches to be applied to a new mining plan and the completion of a deal with the company's hedging banks.

However, both its Bullen and Harlequin mines at Norseman now look set to carry on under the revival strategy, which will also recommend a move to supplement production by treating ore from other gold projects in the area. Chairman Michael Kiernan confirmed at the weekend that a detailed review by external advisers - including a new mining plan for the Norseman mines - was largely complete but the details would not be finalised until later in the week.

"I have met with the team that is putting together the plan and we will finalise that on Thursday or Friday, and that includes talking with the hedging counter-parties," he said.

"We're finalising a proposal to put to the hedging people which will include a management structure going forward."

Croesus shares were suspended two weeks ago after a blowout in production costs and substantial production shortfall at the Harlequin mine which left the company unable to meet its hedging commitments with Macquarie Bank.

Already nursing a mark-to-market loss of $25 million on the hedge-book at the end of December, Croesus was pushed to the brink of collapse by a surge in costs above $800 an ounce - roughly $200/oz above the delivery price of its hedging contracts.

It was also producing only about 7000oz a month, well below the 10,000oz needed to meet its commitments.

Mr Kiernan said productivity needed to improve substantially, especially at Harlequin, where too few production faces had been developed and the mining method was inappropriate for the narrow-vein mineralisation.

While Mr Kiernan declined to comment on whether Harlequin would remain open, it is believed likely to stay in operation if a partial standstill deal can be struck with the hedging banks.

The new mining plan is believed to be targeting monthly production of about 8000oz. To supplement that production, Croesus is expected to target additional medium-grade feed from external sources to keep the Norseman plant at full capacity and produce up to 12,000oz a month.

Croesus has previously held discussions with junior Avoca Resources, which is looking for a toll milling deal to start production from its nearby high-grade Trident project at Higginsville by the end of the year.

A number of small satellite deposits are also owned by other companies in the Higginsville-Norseman region that could potentially provide additional feed.

In the meantime, Mr Kiernan plans to visit London next week to talk to investors in Consolidated Minerals. However, London's investment community is also expected to play a key role in any recapitalisation of Croesus, along with Mr Kiernan and his business associates.

Before Croesus hit strife, Mr Kiernan flagged a listing on London's Alternative Investment Market for both it and his emerging gold miner Monarch Resources.