Underground development at Serra Pelada is to cease immediately following liquidity concerns (Sandstorm Metals & Energy)

Underground development at Serra Pelada is to cease immediately following liquidity concerns (Sandstorm Metals & Energy)

Apparently, Colossus Minerals (CSI:TSX) will no longer be “Building Brazil’s Next Gold Mine” as they state on the front of their corporate presentation.  Late last week, CSI announced that they would be revising their plans for the Serra Pelada gold-platinum-palladium development project in Brazil following financial liquidity concerns and meetings with key stakeholders.  On Friday, the company told shareholders they would need roughly $70 million to get into production and meet existing debt obligations.  As a result, the company announced plans to cease underground development immediately and to, instead, focus on dewatering the underground developments as well as release an initial NI43-101 resource estimate.  The stock fell by a third on Friday closing at $0.17 per share, which put a value of less than $30 million on the company.

This morning, Jamie Spratt, an equity analyst at Clarus Securities reiterated his sell recommendation and $0.20 per share price target.  Mr. Spratt said: “we believe the Company’s financial position casts significant doubt on its ongoing viability.  Given these factors and Serra Pelada’s technical risks, we continue to recommend that shareholders exit their positions.”

CSI, has to pay $3.5 million every 6 months in cash or stock in interest payments and has to deliver $10.5 million worth of precious metals to Sandstorm Metals and Energy and Sandstorm Gold.  If they aren’t in production then they have to make cash payments for the same amount.  Sandstorm is now reviewing their streams and are likely to have large writedowns associated with these streams.  With a $30 million market capitalization and $160 million in debt, it makes the necessary funding, very challenging, if not impossible.

And the winner for ugliest chart of 2013 is…

CSI Chart

Read: Colossus Minerals Provides Update