Due to construction cost overruns and delays at the Tonkin Springs project near Eureka, Nev., owner U.S. Gold (NASDAQ) is experiencing significant liquidity problems. The Tonkin Springs project began production in 1985 with the mining and heap leaching of a small oxide deposit. This operation provided immediate cash flow for the development of deeper sulphide reserves which the company plans to mill, using a new bioleaching technology. The method involves the use of bacteria to pretreat sulphide minerals, breaking them down prior to gold recovery by conventional cyanide milling.
The mill was scheduled to begin production in the summer of 1989. Although material has been processed through the cyanide plant, the bioleach section is still undergoing startup. Noting that it had negotiated a number of proposals with third parties that involved the sale of assets and/or joint ventures, the company said it was unable to come to an agreement acceptable to its senior lender.
Although U.S. Gold received an offer for additional debt financing, it does not believe it can meet its obligations under the proposal.
The company noted that it will continue to explore all of its options which, it said, “could include a restructuring with or without court assistance.”
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