Sprott faces operations challenges at Chile mine
The ongoing covid-19 pandemic has created “significant operating and financial challenges” for Sprott Resource Holdings’ (TSX: SRHI) primary operating asset Minera Tres Valles (MTV), the company stated in its 2019 annual report.
The outbreak of the coronavirus has created near-term copper price uncertainty and significant losses across the world’s financial marketplace and social dislocation,” stated Michael Harrison, interim president and CEO of SRHI.
He added that the company and its primary operating subsidiary, MTV, are “not immune to this ongoing dynamic.”
MTV is the operator of a producing copper mine located 9km from Salamanca, Chile, consisting of one open-pit and one underground deposit. Sprott currently has 70% ownership of the entire mining complex.
The mine achieved a record production of more than 1,800 tonnes of copper cathodes during the fourth quarter and met revised guidance for the year with production of 7,055 tonnes at a cost of $2.66/lb.
However, events including the continuing US-China trade dispute, historic drought conditions, social unrest and most recently the covid-19 pandemic have created “significant operating and financial challenges” for MTV, Harrison said.
With the government of Chile declaring a state of emergency over the covid-19 outbreak earlier this week, officials of Salamanca formally requested MTV to temporarily halt or restrict operations, Harrison said. Immediately after, MTV began implementing measures in respect to the requests.
He added that while the mine plan for MTV is sustainable longer term at higher prices than today, it is critical for the company’s primary stakeholders to provide the financial support to execute the plan. Harrison believes these low copper prices and market uncertainties are short term and anticipates the copper price to recover later in 2020.
At the moment, Sprott is “not in a position to provide guidance for 2020” given the uncertainty, and the company is working to impose restrictions in its mining operations in cooperation with the local community and reviewing mine alternatives for the rest of this year.
Harrison emphasized that the combination of economic and social impacts has created “significant liquidity challenges for MTV” that it cannot resolve on its own.
Shares of Sprott Resource Holdings plunged nearly 20% on the TSX at market open Thursday. The company has a market capitalization of C$10 million.
source: Mining.com
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