MMG Limited (HK.1208) (MMG) today announced a decision to cease gold operations at its Sepon mine in Laos effective December 2013 due to depleting ore reserves and lower margins.
The decision will result in the gold plant being placed on care and maintenance, while the Sepon operation focuses on copper production.
CEO Andrew Michelmore said, “the decision to cease gold operations at Sepon is necessary to preserve the strong contribution of the Sepon business.”
“Sepon gold oxide reserves have been depleting for some time now, with previous forecasts that production would cease in 2011.
“The combination of a higher strip ratio and weaker gold price is driving increased production costs,” he said. “It is no longer economic for us to produce gold at Sepon.”
Despite some shared fixed costs between copper and gold production, the C1 cost of producing gold has doubled since last year to US$1,880 per ounce in the first half 2013 while the gold price at the end of the first half was approximately US$1,198 per ounce.
The decision will result in the need to review the overall structure of the operation to meet future needs of the business. This will regrettably result in a change to resourcing requirements which the company will work through over the coming months.
“MMG acknowledges that this is disappointing news for our workforce. We are committed to working closely with our people, communities, suppliers and the Lao government to make the transition as smooth as possible,” said Mr Michelmore.
Sepon will continue exploration activity for both gold oxide and primary gold in Laos and review the recommencement of gold production when value can be created for shareholders.
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