New Guinea, PNG Gold unlikely to close merger New Guinea, PNG Gold unlikely to close merger
2012-07-27 09:59 ET - News Release
Mr. Greg Heaney reports
NGG NR 2012-07-27 COMPANY UPDATE-1-1.DOC
New Guinea Gold Corp. has provided the following company update.
NGG entered into merger negotiations with PNG Gold Corp. toward the end of 2011. At the time, it was expected that this merger could be completed quickly and without disruption being caused to either party.
Unfortunately, due to circumstances outside of the control of NGG, these negotiations took significantly longer than initially expected, and despite the best efforts of NGG, it now appears unlikely that the merger will proceed. Under the arrangement, funds were to have been advanced to NGG (up to $2.5-million) and these funds have not been made available.
The delay in finalizing matters relating to the merger has seen NGG experience cash flow issues while it moves to recapitalize and move forward as a stand-alone entity. Indeed, securing an immediate injection of cash has been and continues to be the main focus of the NGG board. To that end, NGG has been actively marketing its various investments in a number of Australian Securities Exchange- and Toronto Stock Exchange-listed exploration companies, although to date, it has been unable to dispose of these given the depressed state of global markets. The company has also been in negotiations with a number of parties who have expressed an interest in investing in NGG and its mining project at Mount Sinivit. These discussions are at a critical stage and are continuing.
During this time, the company has continued to produce gold at its Mount Sinivit mine in Papua New Guinea, and once recapitalized, expects the mine to operate on a positive cash flow basis for the remainder of the current phase of mining. Whilst gold production has continued, the company has, however, minimized its expenses throughout this period. Indications are that there is a substantial amount of gold remaining to be processed in phase 1, and that this will occur through to the end of the calendar year and the first quarter of next year once mining recommences.
Whilst the NGG board is confident that it will be able to raise further funds in the near future, it is unable to give a commitment at this time as to when that will occur, and therefore has directed that operations at Mount Sinivit be reduced to processing the already mined ore and minimizing all expenditures.
To date, NGG has received excellent co-operation from its suppliers and other stakeholders. The board would like to acknowledge that support and thank those business partners for their continuing patience whilst it deals with the current difficult circumstances.
The board is continually monitoring the company's financial position and prospects, and will be making a decision on the future of the company in the very near future.
We seek Safe Harbor.