GobiMin announces Strategic Review of Yellow Mountain Projectadmin
GobiMin Inc. announced that it will start a strategic review on the development of Yellow Mountain nickel/ copper project due to the recent dramatic decline of nickel and copper price. At this time, it is uncertain how long metal price will remain depressed therefore the Company believes that it is a prudent course of action to preserve cash and temporarily suspend construction work at the YM Project pending the results and recommendations of the review.
The Company will undertake an extensive and thorough evaluation of the YM Project to determine if it can reduce capital expenditures by modifying the mining plan or to reduce risk by attracting a strategic partner.
GobiMin has spent approximately US$26 million in preparation of ground work, sinking of shafts, water pipeline and power line connections at Yellow Mountain deposit. The construction work done so far remains essential whenever construction restarts. The Yellow Mountain deposit remains one of the largest undeveloped nickel deposits in China.
Strong Cash Position and Debt Free
As of September 30, 2008, the Company had approximately US$35 million in cash and US$11.7 million of bank loan, which was paid off in October 2008. Net cash therefore amounted to approximately US$23 million or US$0.32 per basic share (CDN $0.38). The Company has no long term debt. The suspension of work at YM Project will allow the Company to preserve its cash while assessing all its options.
All figures are only estimates and are not audited. Net Cash is different from working capital and is a non GAAP measure.
Continuing Mining operations
The mining operations at Yellow Mountain East Mine and Xiangshan Mine will not be affected by the suspension of the Yellow Mountain Project. The Company continues to increase its production by improving the mining and processing capacity and efficiency. GobiMin remains one of the lowest cost nickel producer in the industry.
Challenges and Opportunities
In these trying times, challenges and opportunities arise. Management will also perform an overall review of the prioritization and best allocation of the Company’s financial resources to the YM Project and its other projects, namely:
a) The potential future development of the newly discovered Yanxi Project using typical low-cost Chinese mining methods. The metal content, established under NI 43-101 rules, of this shallow deposit is estimated to be approximately 254 million pounds of copper in Indicated Mineral Resources with a further 160 million pounds in Inferred Mineral resources;
b) The potential acquisition of high grade base metals projects which are currently under geological assessment and negotiation.
GobiMin is a junior mining company with nickel/copper sulphide operations and development properties in northwestern China. Through its subsidiaries, Xinjiang Yakesi Resources Co. Ltd. and Hami Jubao Resources Co. Ltd., GobiMin controls three concessions, within a 10-kilometre radius, totaling 455 hectares. In operation since 1999, GobiMin currently operates two underground mines (Yellow Mountain East and Xiangshan) and is also currently developing its Yellow Mountain nickel/copper deposit.
GobiMin also has 40% interest in the newly discovered Yanxi Copper Deposit in Hami region.