Hedge funds slash bullish wagers on gold over Trump election win
The precious metal has fallen about 8% from a record high on Oct. 31, with losses accelerating after Trump’s election victory last week.
Toronto’s First Uranium said on Wednesday it is in talks to sell key assets to be able to pay down $150 million in debt due in less than six months and additional notes that has to be serviced March 2013.
The gold and uranium miner said it had been approached by third parties interested in buying its Mine Waste Solutions division and Ezulwini mine, both in South Africa.
In a statement released on Wednesday the company said there were no assurance that the discussions will result in definitive agreements or whether any transaction could be concluded within the time frame required to settle its outstanding obligations. If not, the company warned, there is doubt that it would be able to continue as a going concern.
The Financial Post reports:
If the negotiations fail, BMO Capital Markets analyst Edward Sterck noted that the company has the option to convert the debentures to equity on expiry. That would have major consequences for long-term shareholders, who have already taken a huge loss on their investment in this company.
The TSX-listed miner also slashed gold production forecasts and put uranium production on temporary care and maintenance and announced ongoing permitting problems over water use at tailings processor MWS:
At Mine Waste Solutions, the company now plans to produce 98,000 to 100,000 ounces of gold from a previous forecast of 105,000 to 115,000 ounces.
At Ezulwini, First Uranium said it would not achieve targeted gold sales of 70,000 to 80,000 ounces, and it slashed its uranium sales forecast to 82,000 pounds from a previous 110,000 to 130,000 pounds.
Rising costs could turn out to be a disincentive for any interested buyer. Cash cost at Ezulweni has rocketed to $2,143 per ounce for the first nine months of First Uranium’s fiscal year versus the previous period when it averaged $1,605/oz. Costs were also rising at MWS coming in at a $613/oz versus $509/oz in the previous period.
So far in 2012 investors seem to have regained some their faith in the company’s ability to pull itself out of its mess with shares up 20% since the start of the year after adding 1c or 5% on Wednesday. That said, the counter is down 80% from last year. Giant Rio Tinto owns 20% of the miner, now worth a paltry $47.5 million
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