Gold Mountain plunges as Elk mine contractors demand $4.2 million in payments
Toronto-listed Gold Mountain Mining (TSX: GMTN) plunged late on Wednesday after the company announced it has received “demand for payment” letters from two of its mine site contractors at the Elk gold-silver project in British Columbia.
In their letters, the contractors are demanding a total of approximately C$5.6 million ($4.2m), of which C$4.7 million is related to expenses incurred by the Elk project mining contractor. The company has also received a notice of enforcement of security from this contractor regarding a general security agreement (GSA) that was previously executed.
In its Wednesday press release, Gold Mountain said it is reviewing its legal options with respect to these letters, and while the company does not have the means to pay these amounts at this time, it is attempting to find solutions to work with the groups.
Meanwhile, mining operations at the Elk gold project had been paused for the Christmas holidays break and remain paused at present, it noted.
Gold Mountain’s 100% owned Elk gold project is located 57 kilometres from Merritt in south-central BC. The property covers nearly 212 square kilomtres of mining concessions and is host to a past-producing gold mine.
A multi-phased exploration program was kicked off at Elk in early 2021, and it eventually led to an updated resource estimate of 806,000 gold-equivalent ounces (4.4 million tonnes grading 5.8 g/t AuEq) in the measured and indicated category, plus 262,000 ounces (1.5 million tonnes grading 5.4 AuEq) inferred.
The project’s preliminary economic assessment outlined an open-pit and underground mine operation producing up to 65,000 oz. annually with an all-in sustaining cost of $554/oz.
The company originally acquired the Elk project in May 2019 for from Equinox Gold for total consideration of C$10 million, comprising mostly of an interest-free promissory note. The debt was paid off entirely by Gold Mountain in May 2023.
Shares of Gold Mountain Mining closed Wednesday’s session at C$0.02 apiece on the TSX, for a daily loss of 63.6%, ending the day with a market capitalization of approximately C$1.8 million. Trading volume was about nine times its daily average.