Great Basin Gold Ltd. (fka GBGLF)

[goldenpolarbear]

"At least six "serious and potentially suitable" parties are lining up to buy the Burnstone mine near Balfour from Great Basin Gold, according to the group's administrators. JPMorgan is handling the bidding process; the deadline for offers is end-March.

Ferdi Dippenaar, CE of JSE- and Toronto-listed Great Basin, left the group in August, after a series of delays and cost overruns on both the company's projects, Burnstone in South Africa and Hollister in the US.

In September Southgold Exploration, which owns Burnstone, filed for business rescue proceedings in SA, triggering a filing under Canada's Companies Creditors Arrangement Act. Last week the group's US operations filed for chapter 11 bankruptcy protection.

In South Africa, business rescue proceedings can be instituted by a company's directors or creditors if they believe there is a chance it can be rehabilitated. But this process wasn't followed in the case of Pamodzi Gold, whose creditors filed for provisional liquidation of various assets in 2009.

Peter van den Steen of V-Squared Business Rescue Services,who is managing the process for Great Basin, says the law permitting business rescue came into effect in May 2011.

Burnstone has substantial gold reserves, about 6,4moz, and construction of the mine is close to completion. Estimates in 2006 suggested it would cost R1bn to start a mine in 2009 producing about 200000oz of gold a year for 14 years. Management decided to use a mechanised mining method called long-hole stoping, a bold step as attempts at full mechanisation have often failed in SA underground mining because of the narrow, uneven ore bodies. It presented major difficulties for Burnstone.

Since 2009, Great Basin has raised about R3,5bn in equity and debt to fund development of both Burnstone and Hollister. Hollister was projected to produce 80000oz-100000oz of gold equivalent (it mines both gold and silver) a year for eight years.

But production at both mines fell well behind forecast. In the nine months to September Great Basin's gold production from its two operations fell to 65610oz from 93775oz a year before. Burnstone has been on care and maintenance since September. Though Hollister continued to produce gold, in the past two months output has been declining because of unseasonal weather and the lack of a mine plan. As a result, various creditors took action, including investment company Franco-Nevada Corp for royalty payments, and the state of Nevada for back taxes.

Hollister is also up for sale, with three interested bidders.

Great Basin's creditors extended an initial US$35m loan to help with its current costs under administration and last week increased this by $16m.

Once bids for Burnstone are received, a business rescue plan can be put together.

Peter Van den Steen cannot divulge the names of Burnstone's bidders but says there are bidders from across the world, and some local entities.

Speculation is rife that foreign bidders could include Chinese, Koreans and Eastern Europeans. Chinese companies have already started to buy up SA mining assets: Chinese state-owned investment group Citic has bought into Gold One International, a group of Chinese investors called Wing Hing International bought Taung Gold, while Jinchuan has bought stakes in Wesizwe Platinum and Metorex. China Africa Precious Metals bought the Orkney mine from Pamodzi Gold's liquidators after Aurora Empowerment Systems could not raise the funds.

Among local companies, several showed interest in the Pamodzi Gold assets and might still have an appetite for acquisitions, such as Goliath Gold, Virgile Mining, and even industrial group Sekunjalo, which had Malaysian partners.

Possible Eastern European bidders might include Renova of Russia, which already has an investment in manganese in the Northern Cape.

According to an investment banker who asked not to be named, "There is definitely an ore body there and somebody will make money from it. The risk lies in valuing it. At least another $100m needs to be spent on it."

Van den Steen is confident that "the transaction process that we have designed together with our advisers will maximise the outcome for the stakeholders in Southgold." wrote Charlotte Mathews on March 7th, 2013.

You, Barry Coughlan and Patrick R. Cooke who just happen to be two Directors of Great Basin Gold will probably find this article by Charlotte Mathews most informative?

http://www.fm.co.za/business/money/2013/03/07/salvaging-some-value