Red 5 to receive up to US$55M from Siana sale

With focus now firmly on its Western Australian gold assets, Red 5 has signed a binding agreement to sell its mothballed Siana gold mine and nearby Mapawa project in the Philippines, after almost 20 years of often troubled ownership (report Mining News)
29th July 2021
Resources Rising Stars

The company will pocket US$19 million cash from the sale, plus the buyer TVI Pacific will pay out a 3.25% net smelter return royalty on production of up to 619,000 ounces.

Red 5 estimates that could see it bank a further $36 million, assuming a gold price of $1800/oz.

The Canadian-owned TVI has been involved in the Philippines mining sector since the early 2000s, and intends to restart Siana in 2023, pending finance, which is expected to be sourced from operating cash flows and debt funding.

Red 5 hopes to see Philippine regulatory approvals for the sale of subsidiary Greenstone Resources Corporation later this quarter.

The Siana operation has had a troubled life. Originally developed in the 1930s, it was eventually suspended by public Filipino company Suricon due to pit wall failures and flooding.

Red 5 purchased the asset in 2002 and commenced mining in 2012 with a plan to recover 60,000-80,000ozpa, from open pit and underground operations.

Under Red 5 it suffered closures in in 2013 and 2014 due to problems with a tailings dam, and pit wall issues in 2015 and 2017.

Red 5 ultimately decided to suspend operations that year due to uncertainty about the government's mining policy, and delays in securing approval for a new tailings dam, recording a A$70 million impairment.

The operation has been on care and maintenance ever since, with holding costs of around $6 million per annum.

Siana has a 504,000oz gold endowment, a four million tonne per annum mill and infrastructure with an estimated replacement cost of some $200 million.

Red 5's updated underground mine plan posited all-in sustaining costs of US$790-840 an ounce over eight years.

Red 5 shares were last traded at 18.5c, just above its 12-month low of 15.5c. The stock has traded as high as 36.6c over the past year.

At current levels the company is worth $434 million.


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