The board of directors of the Company (Board) inform holders of the Company’s shares and potential investors that it has decided to cease gold mining and production at its Sepon mine in Laos, which is operated by its Lao subsidiary Lane Xang Minerals Limited (LXML), 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.
The decision to cease gold operations at Sepon is necessary to preserve the strong contribution of the business operated by LXML. 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 meaning that it is no longer economic for the Company to produce gold at Sepon. Despite some shared fixed costs between copper and gold production, the C1 cost of producing gold has doubled since 2012 to US$1,880 per ounce in the first half 2013 while the gold price at the end of the first half 2013 was approximately US$1,198 per ounce.
The decision will result in the need to review the overall structure of the operation at Sepon 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.
The Company acknowledges that this is disappointing news for our workforce, and is committed to working closely with its stakeholders including employees, communities, suppliers and its partner in LXML, the Lao government, to make the transition as smooth as possible.
Sepon will continue exploration activity for both gold oxide and primary gold in Laos and will review the recommencement of gold production when value can be created for shareholders.