Learning why a placer gold mine fails is essential if a gold miner is to avoid mistakes. Here is a rare documented example of a total failure...
Java Gold Corporation (JVAG on CDN) attempted large-scale placer gold mining on the Toson Terrace at Zaamar in Mongolia. After successful bulk testing in 1996, JVAG forecast 10-12,000 ounces for the 1997 season. But only 457 ounces were produced.
The study identified the reasons for failure – a) bad management, b) old second-hand equipment with stoppages and shortage of spares, c) delays from "modifications" to the wash-plant during production, d) failure to commission the IHC Jig from Holland. Many false claims about progress made in News Releases by management, in clear breach of the Securities Act of Ontario. More false claims were made by investors’ newsletters in Canada, notably the ‘Fagan Report’. Java Gold never recovered from the disaster of the 1997 mining season, with a gold production operating LOSS of $593,951. At the same time, Armand Beaudoin removed about $0.75 million. Drained of cash, Java Gold was paralysed with almost no working capital to start the 1998 season. Mining was delayed and only 18.9 kilos produced, incurring a gold production operating LOSS of $484,343 leading to a substantial NEGATIVE working capital. Cash-starved, the company had to sell most of its interest in the Toson Terrace to get loans to survive. The 1999 mining began late and output was only a little better at 55.7 kilos of gold, most of which was by a New Zealand subcontractor. A serious dispute prevented mining in the 2000 season.
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