Carbine Resources appeals for stakeholder support to revive the Mount Morgan mine site.
Carbine Resources appeals for stakeholder support to revive the Mount Morgan mine site. Tamara MacKenzie ROK070113tkmorg

Cost blow-out spurs SOS plea for CQ mine lifeline

MINING company Carbine Resources said it needs more stakeholder support if its Mount Morgan Gold Project is to go ahead.

The Australian group is closer than any before it to revive the historic site, with a decision on its revised environmental approval (EA) expected late May.

But Carbine's latest economic review revealed a blow-out in the project's operating and capital costs, uncovered in part during demonstration plant test work results.

Carbine issued a statement to the Australian Stock Exchange (ASX) on February 22, which attributes an "all-in sustaining cost" increase (AISC) from A$549/oz to A$862/oz to "higher cyanide consumption and lower by-product credits" for pyrite and copper.

The company has now cut back on spending to "preserve its cash reserves" as it negotiates improved terms of their agreements with key stakeholders, and until the board makes a final decision on its future at Mount Morgan.

Managing director Tony James said the company seeks variations to government agreements considered necessary to improve the returns on the project to an "acceptable level".

Carbine Resources managing director Tony James at the Gladstone Engineering Alliance's Major Industry Conference.
Carbine Resources managing director Tony James. Tegan Annett

"In particular, the board believes that to secure project funding, we need to re-negotiate the terms of the agreements with Norton and Raging Bull in respect of Carbine's ownership and title to the Mount Morgan project," Mr James said.

"The company also requires adequate ongoing support from the Queensland Government, including a reduction in royalties, due to the project being an environmental clean-up project rather than a new mine development.

"Consideration also needs to be given in this regard to the timing associated with ongoing regulatory approvals."

The Queensland Government is expected to provide a detailed response and update today.

In the days after the announcement late last month, a Queensland Government spokesman said the Department of Natural Resources, Mines and Energy had worked closely with Carbine and other government agencies for the past two years to progress their proposal and support the feasibility study.

"This is entirely a commercial matter, as with other private sector projects," the spokesman said.

They said Carbine continues to work with the government on its submission for funding under the $130 million Jobs and Regional Growth Fund.

Mr James said since April 2014, the company has spent $12.7million and been "100 per cent focused" on Mount Morgan.

"It is now abundantly clear that for Mount Morgan to be bankable, all stakeholders will need to make significant amendments to their respective agreements with the Company and the Project," he said.

He said the recent findings associated with copper production and the flow-on effect with operating costs would have caused significant processing issues if not addressed before construction.