Output was suspended at Mandalay Resources’ Cerro Bayo operation after the Delia NW section flooded on June 9. Two miners went missing and were never found.
Mandalay Resources’ (TSX:MND) share price fell 2.99 percent on Monday (October 2) after it placed its Chile-based Cerro Bayo operations on care and maintenance.
Cerro Bayo consists of multiple underground silver-gold mines, and output was suspended on June 9 after the Delia NW vein flooded and two miners went missing. On June 27, Mandalay announced that efforts to search and locate the two miners had been unsuccessful and said it had ruled out the possibility of finding them alive.
Three days later, the firm’s subsidiary, Compania Minera Cerro Bayo, gave notice of force majeure to Cerro Bayo’s primary customers, suppliers and contractors. Once under force majeure, Mandalay’s contractual obligations to those parties were suspended.
Now that Cerro Bayo is on care and maintenance, Mandalay will substantially reduce its workforce in order to preserve financial capital. That capital will be used to restart operations once the company has the necessary permits and is convinced a restart can be accomplished safely.
The remaining workers will, “support the completion of the third party investigation and risk assessment for safely resuming underground mining in the Laguna Verde area, which contains more than 70 percent of the current reserves,” the company said in a press release
Cerro Bayo produced about 14,000 ounces of gold and 1.7 million ounces of silver in 2016. The company expected to produce 1.2 to 1.7 million ounces silver and 12,000 to 16,000 ounces of gold at Cerro Bayo in 2017, according to full-year guidance released in February.
Revised guidance put out in August assumes that the mine will be suspended for the balance of the year, and caps 2017 output at 0.8 million ounces of silver and 5,900 of ounces gold. A technical investigation and risk assessment of Cerro Bayo’s Laguna Verde area is expected to be released in Q4 2017.
“We are committed to safe mining at Cerro Bayo and delivering the value this operation can create for employees through well-paid jobs; for the community through the purchase of goods and services from local businesses; for Chilean local and national governments through the payment of taxes on future operations; and for our shareholders,” said Mark Sander, president and CEO of Mandalay Resources.
The Toronto-based mining company also has operations in Australia and Sweden. Its share price has fallen 59.37 percent year-to-date.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.