Buried by rock, debt
WestMountain looks to go underground after rockslide covers surface high-grade gold being mined at its Terra project in Alaska
Last updated 2/6/2018 at 7:01pm
Landslides of earth and avalanches of debt are burying WestMountain Gold Inc.’s hopes of exploring and developing its high-grade Terra gold project in Alaska.
The latest setback for the company, which has been generating modest cash-flow by sampling high-grade gold veins at Terra, was a physical landslide that buried this bulk-sample area under roughly 25,000 tons of rock and debris.
Fortunately, WestMountain had already pulled crews off of the mountainside sampling area due to safety concerns. As a result of this pre-emptive action, no injuries or equipment damage resulted from the slide.
The 25,000-ton aftermath, however, has likely buried any hopes of resuming the sampling of high-grade veins surfacing at Terra.
“If surface bulk-sampling operations remain closed permanently or for any extended period of time, the company will be forced to change its business plan, which may include implementing underground mining development sooner than expected and relying solely on that underground mining development to exploit the TMC (Terra Mining Company) project and generate revenues,” WestMountain penned in Sept. 16 statement.
It is likely that much of the US$3 million or more needed to go underground would come from investors.
WestMountain went into 2016 hoping to generate US$6.2 million from the gold recovered at its small surface mine at Terra this year.
According to an operational plan filed in February, the company anticipated recovering 5,600 ounces of gold in 2016 from roughly 3,600 short tons of ore processed by the mill and gravity recovery plant at the southwestern Alaska mine.
To accomplish this, WestMountain planned to process 30 tons of material a day, or slightly more than double the 14.46 tons per day processed in 2015.
In total, Terra produced 1,406 oz. of gold from 927 tons of ore processed in 2015. This comes to 1.54 oz. of gold recovered per ton of ore milled. The mill, however, was down 59 days, or 47.7 percent, of the planned 124 operating days, last year.
“The lost gold production and wages paid due to the mill down time cost the company more than US$1.5 million in lost revenue and operating costs,” the company penned in its operational plan. “While all mills require routine maintenance, the amount of down time due to mill equipment failure and break down was excessive and must be reduced to no more than 10 percent to 15 percent in 2016.”
To increase production this year, roughly US$117,000 in upgrades and repairs aimed at reducing mill downtime was slated for investment before the onset of the 2016 mining season.
With a projected US$1.3 million in operating costs, the company was hoping to net roughly US$4.8 million from the gold recovered this year.
Even before the rockslide, things were not going, according to the 2016 plan for Terra.
In August, WestMountain went to its largest creditor, Boco Investments LLC, for additional loans to bridge a funding gap resulting from a slow start up of this year’s operations.
“These borrowings were necessitated by unexpected delays in revenue generation caused by operational problems at the company’s Terra camp,” WestMountain explained.
By mid-September, the company had processed 890 tons of material from the high-grade gold vein at Terra and had another 1,470 tons of stockpiled material that was mined prior to the landslide.
While this puts WestMountain on pace to produce more gold than last year, it will be less than hoped, even if the company could process all of the stockpiled material in the waning days of the 2016 season.
“As a result of the expected reduced revenue caused by the slough event, the company will most likely be unable to fund future operational costs, including planning and commencement of any potential underground mining development,” WestMountain informed shareholders.
In addition to coming up with an estimated minimum of US$3 million to US$5 million for underground development at Terra, WestMountain owes roughly US$5.7 million in past due loans and interests to Boco Investments, a company that already owns about 54 percent of WestMountain’s issued and outstanding shares.
“It is likely that the company will need to raise additional new capital through the issuance of equity and/or debt in the near-term to fund our loan obligations and continue operations, in addition to the capital that would need to be raised for the commencement of underground mining development at the TMC project,” WestMountain said.